Is Sirius XM a Buy, Sell or Hold? 62 comments
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After reviewing the latest reports from Merrill Lynch and Goldman Sachs, the only apparent fact in this sea of uncertainty is that one will be right, and one will be wrong. True, Goldman has been correct thus far, yet everyone knows past performance is no indication of future results.
In what appears to me to be an ironic twist, Merrill has become a lot less bullish while Goldman has become a little less bearish. In Merrill Lynch’s latest report, a lot of attention is now being paid to the 2009 debt issues that are approaching. Citing the worst credit market in decades, Merrill’s report is full of potential negative impacts should Sirius (SIRI) not be able to achieve its refinancing goals which include everything from diluting possibilities to shareholders being potentially wiped out in WAMU fashion. Merrill again reiterates that they do not see this scenario as likely.
I found the Goldman report much more interesting, however. For starters, they lowered their target to .50. On a percentage basis, that doesn’t present much downside risk relative to their recent downgrades, although that does not include further dilution or the total loss of shareholder equity. They cite key risks as ”faster-than-expected merger integration and financial outperformance.” Key risks? Those sound like risks to short-sellers and not shareholders.
Both reports seem to give much more attention to the May 2009 loan, and both seem to concede that the February 2009 converts are not a major hurdle anymore.
My take on this is to hold for now. The Senate Saturday passed the 25 billion dollar auto loan bill. This should free up money for the OEMs to use elsewhere, including the potential for the issuance of lines of credit to Sirius XM. Every dollar that can be deferred by such a plan could be used to eliminate the debt problems. The pending government plan to restore the credit markets should be approved by Monday as well.
As for the key risks cited above by Goldman, faster-than-expected merger integration is certainly plausible. In fact it seems the company has done little else thus far this quarter. Financial outperformance seems highly unlikely, unless the company can execute on the the Best Of programming packages. XM subscribers potentially joining Sirius for Howard Stern and the NFL can certainly lead to increases in revenue, and those 20 million nonsubscribed radios already on the roads may see new life as GM owners reactivate the service to get the content available to them on Sirius. This won’t become reality, unfortunately, until a full quarter of the combined services can be effected.
Disclosure: Long Sirius.
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This article has 62 comments:
I did this a couple times in the past and your posts are a reminder never to get so emotionally committed to a stock that I don't use the discipline to preserve my capital.
As for SIRI, it is obvious that the toxic debt has killed the common. It has happened many times before to companies that choose to load up on toxic debt and then have their business plans underperform. The toxic debt holders simply short the common into bankruptcy or a fire sale. Either way, the debt holders make out like bandits. In bankruptcy, the common will be wiped out and the debt holders will be the new common holders, if there is still a possible business here. SIRI will emerge from bankruptcy with a much small debt position (of the non-toxic kind) and the old debt holders will hold plenty of fresh new shares issued for forgiving the debt. Since debt holders made out with their short positions, they end up with making money coming and going.
Meanwhile, longs like you will be posting... why didn't I see this coming?
Im tired of analyising analyist opinions on this stock. Go back and read the buy rating opinions on AIG a few weeks ago, and Washington Mutual. Analyist opinions are important, to get a sense of what wall street wants you to do with this stock. Right now, Id say its getting closer and closer to buy time.
Brandon.....Did you see what you did there? You disregarded the Fed 09 debt as a major hurdle, because they said so. WHAT!!!!!???
I thought thats why the stock was at .80 cents? YOUR KIDDING ME!!.
Do you mean this stock price really had nothing to do with the debt due in fed09? OOOO, now its the one due May09?
Dont you see what is going on here? They are "transferring" your worry, subtely and slower from the fact that the Feb debt is no longer an issue, and when it clears that hurdle they want the new fear already in place and situated so they can keep the stock down even longer.
And you didnt mention this. See, now Im back to questioning whether your long or short again, Brandon, or just incompetent. You just justified this little transition by agreeing with it without even mentioning the most important facts about it. That the Feb 09 debt due was the most important one, because it was first, and would dictate further agreements being sucessful. Which I agree with. If they clear the first one, they will clear the next 2. You doubt they will outperform? Didnt you write yourself that they guidance was a joke of conservative? Now your doubting outperformance? You confuse me Brandon. Are you saying the guidance is conservative, or is it too high? Did you change your opinion on this stock? You sound like a seller/shorter now? Hope thats not true.
Have a great day!!
FRE/FNM Up over 40percent before the government took them over.
No, stock price gives NO indication of future sucess or failure.
Washington Mutual failed because they bailout package wasnt passed fast enough for the FED, so they TOOK OUT WM. Of course they could of given them moeny to survive, but they DECIDED not too.
Stock price hits. 50cents, bankrupcy police arrest Sirius satellite radio for having too low a stock price. They are forced into bankrupcy, against their will, even though they can pay their debt. Too bad, says the bankrupcy police, "Even though there debt obligations have been met, and revenue exceeds debt payments and all other costs of operations, we are seizing this company and screwing the common stockholders".
You can force a company into higher interest payments due to stock price, but we all know that will not work this time, Sirius has the upper hand BECAUSE of the low stock price. No value left in it right now.
So take your bankrupcy fears and begone, Relmor will have none of it. Facts dont dictate that action. Facts say otherwise.
Ooo,its down 15 percent, its going bankrupt...
O wait , its at $1 again!!! This company WILL make it. O wait.....
You see, I can do this all day. The MM are tanking this stock, like sl62 says, and thats the fact of this stock story. Plenty of buying interest to raise the SP many times at different points, only to be railroaded the other direction. NO VALUE has been allowed to enter the SP since GS, Sirius, and the banks in question colluded to screw the stockholder. Will they screw us again? Not when its trading at .80 cents, they cant. No value in the common, its going bankrupt, so how can their be? Either it is, or isnt, and then theres no value. You can dilute a doomed companys stock, unless your trading much higher than your worst case senario value. I dont see LEH issuing shares at .30 cents, do you? Did I see any stock offerings WM the last few weeks? Of course not, because people arent fools. So if Sirius diluates at these levels, than that proves manipulation. Thank you. No need to send me things in thanks, but my logic is sound, and I implore people to try to convince me otherwise, or prove my logic wrong.
If there is worry about further dilution of stock, then they are admitting its overpriced right now, and there is still tons of value left in it.
You cant have it both ways.....
Either it needs to be trading higher, or in fact it does have no value.
If it has value, then the diluting entities will be more than happy to buy into the future of SATRD. If it doesnt, then they cant use the stock to dilute and SATRD will look to other ways to raise money.
So basically what Im getting at is it proves incompetence if you say
"worry about further dilution" and then say the company is going bankrupt. Why was Fannie and Freddie issuing preffered shares so close to going under, and being sucessfull? I seriously doubt those shareholders(other than banks who were forced to buy them) were given the reality of the situation. But we are, constantly, daily, over and over. This company is doomed, their stock is doomed, but BUY SHARES. You asking the converts a buy in to your common as insentive to buy their bonds. Bond holders to not buy bonds of failing companies. Ever. For any reason, intentionally. No one wants the uncertainty of getting paid or not, how much, and in what manner. You make a deal to see it to the end, or to convert to common if the stock and company are sucessfull. Then you dont want to be a debt holder, you want to be an owner. So to insist on a better convert price is basically saying, I expect this stock to take off, and I dont expect bankrupcy.
"Stock is doomed, company is doomed, market is doomed...."
"Sirius worries that the convert price the GS is going to ask for will be too low, and would risk "further stock dilution..."
Wait a minute.... This stock is doomed, and has no value. How can you dilute a worthless companies stock? OOOOO, unless its not worthless.... I get it.
Hey, do you want to buy WM shares for $4? Didnt think so. How about at $1? Didnt think so. What about LEH at .40 cents? Didnt think so.
Hey , do you want to buy some bonds from LEH? Convert price of .20 cents? Didnt think so.
Must I go on? Or can I go back to sleep now. I dont like waking up to lies, but my job here is complete. I will ajourn. Have a great day!!!
You should go have drinks with Konst and all the others. Have a good time talking about your next investment. If you're long here, please jump, sell like GS wants you to and let's be rid of you. Goldman already knows which of their summer home renovations your money will be going to. Thanks and have a god one!
Thanks for the sanity (and entertaining reads!). I thought we'd seen all the madness by now around here, but Tyler and Brandon have just gone to new lows. Wow...At first I didn't even post here because it wasn't worth the time to give to Brandon's article. Talk about insipid...sorry Brandon but huh? You really think the stock is a hold?? Appreiciate your advice (and the genius opinions of GS and ML!) Now we're giving credence and page space to the opinions of two failed investment banks who have an interest in seeing SIRI go down? And now we know Merrill most likely also has a short in on SIRI. Why else whould they chime in now? They're a FAILED INSTITUTION THAT ONLY STILL EXISTS BECAUSE BAC BAILED THEM OUT!!!
People posting on Seeking Alpha: have you been locked in a closet the past two weeks? You have nearly lost everything you own because of decisions MERRILL LYNCH, GOLDMAN SACHS, BEAR STEARNS, LEHMAN BROTHERS AND MORGAN STANLEY made--those were their OPINIONS TOO (LOL)!!!! And you trust the contents of this article? Wow. And worse, you have the stones to make disparaging comments about long investors??? WHERE IS YOUR CRED???? Further do you mean to tell me that you are credible talking about how SIRI's P/E multiple is too high at 10 or 20 when all these investment bank pukes were leveraged 40:1???? They were leveraging YOUR VERY LIVES TOO BTW...SIRI is just tryng to deliver a good service to its consumers. What are you thinking???
So they want to dilute any positives that are released.
Does anyone think GS would let SIRI announce their new shared plan Oct 6 without Sachs issuing a negative and damaging report to counter? What a bunch of losers...
We all know that the debt issue is the game changer for sentiment on this company. For Weinkes to stress May, 09 debt which is a credit facility that can be easily extended with its current banking partners, as a more relevant issue than the 40% GS held Feb, 09 convertibles is laughable. Their good payment history and no future reason to be concerned about default has me only worried about the debt extension cost for the May, 09 facility. Taking care of Feb, 09 debt will make May a less expensive proposition.
I hope that we finally get an investigation into GS' motives. All Analysts are giving opinions based on pre-merger models because the company hasn’t given them anything else.
If you back into Weinkes subscriber number he is using a churn of about 2.04% (using 9 million sub adds, 2009 total subs before churn= 19.5M + 9M = 28.5M, using 2.04% churn = 6.98M deactivations, Leaving 2.02M total new Subscribers for 2009). From this he and others are basing projections for revenue, and FCF along with a sprinkling of current outrageous debt expenses for next year.
Without solid guidance and a detailed explanation of how these metrics and new ones will be implemented from Sirius XM, we will be subject to downgrades with reduced financial expectations from just about everyone.
The bright spots for revenue growth that aren’t even in current operating metrics, arpu, sac, and churn, are new programs like “Best of Both”, “Ala Carte” adds, Used car activations, and a retail market in 2009 that will be reinvigorated with ala-carte radios and other new products. In addition Sirius is the only company that includes Ad Revenue in ARPU and this should grow and who knows how KPMG will account for it when combining the new company’s financials.
Frear has a lot of work to do to explain this company’s new operating metrics so that they can be easily understood by the investment community. Now that they are not competing with each other, full disclosure to computations will be refreshing. These analyst recommendations at this time are there and available, but IMHO they are completely useless.
1. Sirius is going bankrupt.
2 Sirius is going private.
3. Sirius is getting bought out, at a low ball price.
4 Sirius is getting bought out at a premium price.
5. Sirius is striking a deal with Microsoft.
6. Sirius is striking a deal with Apple.
7. Sirius is striking a deal with Google. etc.....
8. Sirius is going to dilute there shares further.
9. Sirius is going out of business, period.
10. Sirius can pay off the debt and renegotiate it sucessfully.
11. Sirius cant pay off debt, cant find any lending, and current debt holders force liquidation of assets.
Lets examine which of the above senarios is accurate.
1. Sirius is going bankrupt, regardless of new debt, old debt, or whatever. This could happen if the economy goes into a long depression and there is no money for any discretionary spending. Since 70 percent of our economy is literally discrectionary, there is a massive depression, mass chaos, martial law, bank runs, and general terrible times.
If Sirius goes bankrupt outright, in this senario, I wont care because I will be in the hills of the Colorado rockies hiding in a hole somewhere. Id trade my stock for some food and water at that point, and a gun maybe. Thats if the FED cant create another inflationary cycle. They either will, or it will be so ugly you will forget you had shares of anything.
2. This is good. Stock is much harder to manipulate if its not publically traded. This might be good for the common in the long run, and I would welcome it(cant get much lower, why not)
3.After fighting the FCC, the DOJ, the NAB and analysit, Jim Cramer, and the banks, the board GIVES in and accepts a low ball price. Therefore wasting EVERYTHING done till that point. That would mean Mel's legacy is ruined, all existing debt holders now must deal with new management(of get payed off in one chunck(probably not perferable(why they choose a convertible bond in the first place) and are left out to dry. Not a likely senario unless they cant get financing. Which I will come to later. So as a seperate possiblity, I doubt it, plus they run the risk of a proxy vote, sharehodler.....
Ooops I'll finish later, Dexter is on. Got to go.
TO SAVE THIS STOCK THEY NEED SUBSCRIBERS!
BUY YOUR SELF A SIRI OR XM RADIO AND SUBSCRIPTION!
THE HIGHER THE NUMBERS THE FASTER THEY WILL PAY OFF THE DEBT AND THE MORE SUBSCRIBERS THEY SEE, INVESTORS WILL SEE TOO!
BUY A SUBSCRIPTION TO SIRIUS XM! IF YOU CARE ABOUT YOUR INVESTMENT! TELL ALL UR FRIENDS TO GET ONE!
Sirius gets bought out at a preminum, I could live with that.
6. Mergers...Good for the stock.
Other issues ive addressed. And the last issues are fear driven and hope driven.
TELL YOUR FRIEND TOO!
"People who traffic in bonds say that some of GE's longer-dated debt -- at about nine months -- was swapping between traders at a price Monday that gives a 10% annual yield.
That is a stunning number, they say, given that this type of paper just months ago was priced in the 4% range.
"That's the best credit around," said one trader yesterday. His strategy: Hold out for a 15% yield.
Remember, this is GE, one of the few AAA-rated companies, and a bedrock of American industry. And as its costs go up, it also is likely to charge others more to borrow from it.
Unless a sharp uptick in confidence sweeps through the markets, higher rates will cascade across less-solid companies, if they can get hold of cash at all."
Watch the credit markets, not the stock prices.
So what are the BIG BIG negatives other than the debt thats killing us?
1: A new $400 million dollar satellite is set to launch next fall (FM5) that is INCAPABLE of handling both Sirius and XM frequencies. The combined company is looking at a total of 9 satellites to broadcast the bandwidth of just 2. Oh, and lets not forget there is no launch insurance on this bird, nor for the ones already in orbit (other than the 2 failed XM birds that kept their insurance for obvious reasons.)
Or the debt both companies have with SSL for the satellites that is not included in the financial report as debt. (XM still owes $400m on XM4 in a lease-buyback program) Confusing on the details, but if the bird fails XM is on the hook for the $400m on the spot.
Large numbers of subscribers have been canceling their accounts in the past 2 months, all the while the company is claiming to add another 1m subscribers by the end of this year and another 1m next year? Subscriber count will either be sideways, or possibly DOWN, not up. Doubt me? Go-to Best Buy and ask about the services. Most employees will tell you to wait for the combined receiver.
What they have not said about the "Best of Both" programming that is supposedly able to work on existing receivers? In order for that to be the case both divisions need to reduce the channel count for "their" channels to make room so you can "add" the others best channels. The end result? Unless you pay the extra $$ for the combined plans, you will have FEWER channels available at the current price point. (This does not take into account the loss of channels as mandated by the FCC)
I think Cos1000 needs to take a better look at Siri and XM's last quarterly reports and get a better understanding on the total amount of debt the combined companies are carrying. As for why the bond bullies would want to convert, or not renew the bond? The Company only has enough money to pay down the interest (330m / year) and NOTHING on the principal, all the while the debt has been slowly growing over-time.
Would you seriously lend your cash to a company with a debt rating the same at WaMu's before they went to zero, with no profits EVER to pay it off? If so, I guess you must be a lender from WaMu or Wachovia.
1.15 and glad I did otherwise I be down another 40-50%. It's time to jump ship. Accept the defeat, write it off on your taxes, and keep it moving.
... not Jim, I am aware of the problem in the financial markets which is why I posted the fact above. This credit squeeze is not only a problem for Sirius but for any business that needs a credit line to operate. You are absolutely right that if this problem is not fixed that being able to pay your debt won't matter if you are not able to possess the debt to begin with.
Most people don't realize that in the Real Estate or Mortgage Backed Security situation that regulators, and bank auditors have marked to market existing performing loans (folks and small businesses making their payments on time), making up those MBS's, which means those business assets or property values underlying the MBS's have decreased in value by as much as say 40%. This requires the institutions holding the loans to make a payment (cash) to sure up the securities. WaMu had that payment, similar to a margin call but different industry, happen to them to the tune of $15 Billion and were seized by the FDIC because they were under capitalized.
This required inflow of cash capital into the system is what is causing most, not all, of these bank failings and it is due to the re-valuation of existing assets underlying performing mortgages / loans. The opposition to the bail out proposal is calling for a halt to re-valuating these assets to market at this time if the loan is performing. The Fed says at last count that their were 120 institutions on their list of banks in jeopardy and the count is growing. If you want to talk about Sirius' debt at this time, you just don't get the problem out their. T
here currently isn't money from institutions to be lent to anyone, you, me, other banks, retailers, car dealers, your employer.... anyone. So get off the BS and pay attention because your seeing a historic event in American History unfold right before your eyes.
Really? Try 4.1B in total debt (bonds and contracts with SSL)
>and reducing redundant and non performing >channels to make room for Best of Both, new >revenue, is just smart business.
Are you serious? When I scroll through my Sirius receiver, I don't have "redundant" channels. Maybe I would with a combined receiver and a subscription to both services; but with existing equipment, I get standard existing channels that I have been paying $12 a month for.
Now enter best of both. My house radio, nor the 2 cars have a combined receiver, so I get what I get on them. In order to get best of both on my Sirius receiver, some of the channels I have been getting for $12 a month for are going to have to go away. If I continue paying $12 a month, I will get less channels than I do today. If I pay another fee for best of both, I end up with the same total number of channels that I have today. The receivers are only capable of receiving a total amt of bandwidth. You want the option to add channels, you need to take away from the existing to make room.
>WaMu and Wachovia are not in the same industry so >wipe the "spiddle" from your chin and move on.
You're right, they are not, but what they did have going for them was they actually made a profit a one point in their exsistance and as such gave investors more of a reason to believe they would repay their debt.
You are so bullish, so tell us, how much MONEY have you made off this stock since you started buying it? Last I checked, no one but the founder of the co made money and that was only because he tossed his stock shortly after going public and jumping to $60 a share.
I'm going to rock out to Guitar Hero 3 until SIRI is back above $4... Wish me luck
This is my logic the company now owns athis market since the merger and yes there are problems however to be able to control any area of a business without significant competition.
I spend a lot of time in Mexico and Carols Slim became one of the richest men in the world because of his single control over the cable and telephone services for the country. True we have a lot more regulation oversite in the US but maybe we ought to bring this play to his attention he could buy this company out of his lunch money.
I think we would all be surprised if something like this happened and it became the success it should be considering the companies positioning in the marketplace.
Something has to happen with this company because it's real value lies in the fact that Mell has already got control of the market with no challanger of any strength if he moves quickly to shore up the play even if it means bringing in financial strenght to protect the companies position.
However what do I know , it just makes sense to me and the price is now so low it won't help to sell out and take a loss from this point so I will ride the horse that I rode in on. (smile)_