Bullish Citi and Bearish Goldman Weigh In on Sirius XM 38 comments
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It seems fitting that after Mel Karmazin’s speech at the Merrill Lynch Media Conference, the first two analyst reports issued come from the opposite ends of the spectrum. We have the satellite radio bullish outlook from Citi’s Tony Wible, and the bearish outlook from Wienkes of Goldman Sachs. This leaves all of the other analysts who fall between to issue analysis and reports. Getting the two extremes out of the way seems fitting.
CITI
The CITI analyst has been adjusting his price downward with each report issued, and the latest report is no exception. The new price target for Wible is $5.00, although the analyst still considers Sirius XM (SIRI) as “massively undervalued”.
As noted by Karmazin at the conference, the expected synergies of $400 million have now been bumped up to $425 million. While this would appear to be good news, it was offset by a weaker top line according to Wible. Wible also noted that he sees revenues weaker from softer subscriber metrics, and that investor fatigue has worn on the equity.
As the bullish analyst in the pack, Wible has now adjusted targets from $9.50 down to $5.00.
GOLDMAN SACHS
Wienkes, the analyst that longs love to hate, is maintaining his sell rating on the company. Of those analysts following the sector, he has been the closest to actual performance. The main question is whether the price action is a function of apathy for the equity or whether Wienkes has a solid estimate based on metrics.
Wienkes' report does not contain a lot of detail, and the analyst maintains his sell rating because of lower subscriber estimates, as well as the upcoming financing for the company. Wiekes also notes that part of his rating relates to investors' “show me” sentiment, which is a subjective measure of performance. This subjective aspect of the Goldman analysis is new in their reports.
Personally I would agree that there are many on the street who are in a “show me” mood. This could leave Sirius XM with upside potential if Mel Karmazin is sticking to his typical mode of under-promising and over-delivering. The big question is whether Sirius XM can over-deliver. For investors, this could mean waiting for the Q3 2008 financials to hit the street.
As I expected, Karmazin did indeed outline more detail, but it would appear that the street still wants more. This has the equity trading at new lows, and adds to the frustration level of sector investors. Sirius XM is at the mercy of short term traders. Long term investors have little to defend their position because the sector has been so embroiled in turmoil for well over a year.
With analyst estimates carrying a low of $1.00 and high of $5.00, there is a lot of room for varied opinions. Expect most other analysts to fall in between these estimates, and this equity to trade on near term speculation rather than long term until the third quarter financials and financing are outlined. There would seem to be some indication that Sirius XM will address the financing sooner rather than later. If this happens, one of the main overhangs on the stock will be removed. Whether the removal of such an overhang is enough to solve investor fatigue is yet to be seen.
Position - Long SIRI
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This article has 38 comments:
[EDITED for vulgar language-SA Editors]
I sense some anger.
:)
More like disgust. Duh!!
: )
Why all of you have so much faith in him is beyond me. Your dreams of big money from an unprofitable company have crashed under his leadership.
His mantra is: "teach a man to fish and you feed him for a lifetime."
Well, I guess that's good advice, but that still leaves me somewhat suspicious as to how well he's done with his past picks....
And by the way, I almost forgot, there is one more thing: Can anybody out there speak with their wits about them as to what is actually going on with this stock? I'm tired of hearing all this crap about what Cramer said or what Mel shouldn't have said or what Mel didn't do. In a nutshell, with the stock price already in the toilet, is this company actually headed for the sewer where it will never recover? And please, no illiterate remarks are necessary from the peanut gallery with their mantra: "I told you so."
Scot's Slant
If the Vicar were a millionairre he wouldn't be here lurking this site and this discussion. My guess, he is someone who craves attention and owns maybe $500 worth of stock (Probably bought 100 sh. at $5.00).
Lets just all ignore him once and for all and then maybe he will just leave the board leaving relevant comments and usefull information.
The stock is news driven. SIRI needs almost daily press releases with new offers and programming services.
Unless you actually believe the company will go out of business you should either hold or buy. As far as the subscriber slowdown, what moron did not know that we would see that right about now as a result of the merger confusion? Now that that is done, and as the subscription options get clarity, subscribers should pick up over the Christmas season.
SIRI should be negotiating marketing partnerships with media content companies like NetFlix and Blockbuster as I said in my article:
seekingalpha.com/artic...
to drive new subscribers.
We should also remember that the 9/11 terrorists completed their training and laid their plans under Bill Clinton.