Citi: Sirius XM Is “Massively Undervalued” 36 comments
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In a research note yesterday morning, Citi states:
Buy SIRI (SIRI) - The stock has been hurt by the difficult macro backdrop and auto production slowdown; however, we believe SIRI is massively undervalued as investors fail to appreciate the size of merger synergies, the opportunity for top line improvement with new plans, and the benefits of greater OEM penetration.
Value is in the Content - Reports of a new internet streaming application that would allow SIRI users to get content on their iPhones and other portable devices are now emerging and highlight that SIRI’s value lies in its content and not its hardware or infrastructure….
A Little Help from Apple (AAPL) - While AAPL is generally perceived as a competitor to satellite radio, the streaming application underscores that it may complement and help satellite radio as the new application would:
- eliminate SIRI radio costs;
- help generate new subs at a lower cost (albeit with a higher royalty rate given the internet streaming); and
- likely improve the ability to purchase tracks from AAPL.
I have said before that Sirius XM stock is undervalued. Now that Citi seems to agree with my reasoning, I look forward to more bullish analyst comments in the coming days. If I can see this so clearly, and Citi sees this so clearly, it stands to reason that the 20 professional analysts covering the stock should be following soon…
Position: Long SIRI.
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This article has 36 comments:
Glad that Citi sees the real potential hidden behind the 17 months of FCC melodrama and the tough financing deal to complete the merger. Now we in the 'payoff' stage for SIRI.
Is this just a pie-in-the wish to save your underwater investment?
nope, look for them to partner with solid content providers to deliver a differentiated experience to continue the growth of the ipod juggernaut...SIRI may yet be a part of that, but it won't be on an ipod with a satellite receiver in it...more likely exclusive podcasts, etc as SIRI expands its distribution beyond the satellite infrastructure.
When Mel was with Cramer two days ago he chastised Cramer for only talking about Goldman Sachs 'sell' report. Cramer rightly said "Mel, he's the only one who has got it right!"
MY POINT is that the "BUY" analysts have all along been WRONG and everybody who has bought on their sayso over a long four years has less money as a result. Their track record is pitiful!! I think the point is a very simple one!!
seekingalpha.com/artic...
Like to see $2.00 today. Need the "Wampum"!
All of the partnerships will be great and the additional revenue is more than welcome, but until the company can convince the street that these two items in total are taken care of without further dilution of shares, the stock will not move anywhere fast. When it moves it will move on emotion and the Cramer and Weinkes will beat it back with the outstanding Debt Issues. This is the real battle that needs to be fought to move this stock's price up. Not Apple and Ipods.
I am long Sirius XM since 2002, I own over 30,000 shares, and 2009 will be the year of Debt Resolution or Not. I will hold on tightly to my shares looking for more than "Window Dressing" around this Debt Issue. As a stockholder I want some answers not White Wash.
It is hard to imagine that Mel et al would not have conducted proper due diligence as to the available terms and framework for financing an imminent merger approval. A broad, flexible, framework of terms should have been available in advance of the approval and a prospective facility in-place prior to the midnight massacre.
The NAB stay documents would have been perfected and ready for filing well in advance of any approval and certainly could have easily pre-empted formalization of the merger had NAB so desired.
Looks all too similar to the guy who buys a house he can't afford, uses exotic financing to close the deal and then sees the market drop 30%. The question is, when the "resets" come, will the common shareholders face foreclosure?
The Debt I'm talking about needs to be refinanced or paid off in Feb, 09. These are Sirius' 2.5% convertable bonds, with a share convert of $4.41. Now maybe if the stock gets their the bond holders will convert, if not depending on credit markets, they will have to be refinanced.
In addition there is an additional credit facility that XM has that was initially for $ 200 Mil and then extended an additional $100 Mil under the original terms. This is not a BOND it is a Credit Line that will expire on May 5, 09. This will probably be extended given good revenue growth and merger synergies and the Feb Bond refinance now know. We don't know what the terms will be or for how long. Maybe they pay some down and extend the rest (speculation). So as you can see so far I don't know what your talking about.
Some have raised concerns about the Sept.,09 8.75% Convertible Bond due, with a share convertible price of $28.5, but this is only for $1.75 Mil and they will just probably pay this off, again if things go as planned. Honda has a $33.2 Mil, 10% Discount convertible, with a share price post merger of $ 0.69 / share to convert. They will probably just convert and take the funds from the share sale.
The only other debt to shareholder dilution that is concerning it the $400 mil, 10% Senior Convertible, due in Dec. 1,09, with a share convertible post merger price of $10.87 / share. This is significant and again can wind up being dilutive to shareholder equity, or if the winds have really blown right over the next 15 or so months, refinancing these notes will not be an issue.
Now you can see why, I posted above that 2009 will be the year of Debt Resolution or Not. All the noise above from relmor makes no sense to me, short squeezes, convertible arbitrage, zero sum game. Although I very clearly understand what the terms mean, I don't see how they foretell the future for the company and the real live issues of debt and business plan execution that is in front of them. I want answers to the questions on refinancing this debt, not BS. If revenue generation plans and merger synergies do it, then tell me how and when. Best of Both, possibly at 5.4% of current subscriber participation and additional $48 Mil / Year with, 50% participation an added $ 480 Mil/ year. That one example of what I'm talking about. They need to know their business and its future in a way that can be clearly communicated to the "street". Or else this stock goes nowhere, period. I look forward to reality as presented by management after Labor Day. Mel don't fail me now......
To my point, they don't have an edge in content. And the hardware maynot be the most cost-effective way to deliver content.
Good luck, but I am really not sure about this one.
[ED: Comment edited to remove abuse.]
Why not make a "new company"???
and once more prove that this market is no longer one for retail investors.
EBITDA for the most recent quarter also reached a seven year high. For Sirius Satellite Radio's twelve months ended June 30, 2008 EBITDA was $(304,390,000), compared with $(540,580,000), a 44% improvement over the comparable year earlier twelve months. EBITDA for the most recent twelve months also reached a four year high.
January will make this deal sweat!