3 Sirius Scenarios Outlined by Citi

On the heels of three reports issued on Friday, Citi’s Tony Wible came out with his own report Monday, and joined Barclays in seeing upside potential in Sirius XM Radio (SIRI). Wible reiterated his buy rating on the equity with a target price of $3.75.

“We believe SIRI’s recent stock performance is a reflection of auto weakness, credit issues, and diminishing consumer confidence. These overhanging issues have made it more difficult for investors to appreciate SIRI’s long term value, which we now quantify using terminal cash flow analysis, long term sub estimates, and leverage assumptions.”

The analyst outlines three scenarios for investors to consider:

- Using a conservative 7x multiple on terminal cash flow per sub we believe SIRI would be worth $1.41 (20% penetration) in a worst case.

- The company could be worth up to $4.57 (50% penetration) in an aggressive case.

- A more realistic scenario (35% penetration by 2018) suggests that the stock is worth $3.00.

Wible does recognize near term issues that can weigh on the stock, identifying OEM sales and the re-financings as issues that give concern, but also as potential positives once auto sales turn around, and the refinancing happens. Wible has made a conservative assumption by calculating that the $300 mil due in Feb will be funded by an equity offering. He sees improvements in FCF due to merger synergies may put SIRI in a solid position to refinance the remaining $750 mil due later in 2009.

Position - Long SIRI

Comments

[SIRI, go up!:]

I wish!

2008 Oct 01 05:14 PM

[jsun1321:]

I wish this Wible guy would be right just once!!!

2008 Oct 01 05:32 PM

[muley101:]

I really hope you guys took my advice in the previous article and sold SIRI and bought NCC. SIRI is going nowhere for the next 6 months. There is a real downside potential of loss of revenue from current $20 subscribers downgrading to a la carte programming at $6. And an equity offering will dillute shares further.

NCC is on a rocket. It went from 2.05 to a high of 3.14, just as I said it would do 2 days ago. It is now at 2.78 in after hours and is still a screaming buy. I am up 185% on NCC in 2 days. One more day and I cover all my SIRI losses. I think it goes past 3.50 tomorrow. Get in while you can. Then come back to SIRI later and double up at the end of the year if there is some good news by then, which I doubt.

2008 Oct 01 05:41 PM

[WellThisMig...:]

Muley101...

You better hope that they pass this bill tonight or your SOL on your NCC position... No matter how good their books look, they will dive hard if this does not go through...

2008 Oct 01 06:01 PM

[OSUBuckeye:]

NCC - are you serious? That bill isn't enough to unwind their issues.

2008 Oct 01 06:13 PM

[Siriphone:]

There you go Muley... Keep blogging about Nat. City. Get all the publicity you can... maybe the more you blog, the better the stock does? Thats sound judgement. W.T.M.B.S. is right. You are in the toilet if this "revamp" isn't spotless. Btw, I heard rumors of some bull sh*t political additions to the first set of policies. Something about an incentive, or break for certain types of arrow heads? These guys are serious this time, really looking out for our best interests... Political agendas are going to spoil this thing again...

2008 Oct 01 06:14 PM

[holdon:]

muely i read your post yesterday,your right on NCC, i should have listened.
another one is ABK, check it out. these are good stocks for swing trades.
well t m b s makes a good point though, have your finger close to the sell button, you have to babysit.

2008 Oct 01 06:27 PM

[rsquared:]

I have a small company that is getting killed in the current economy. Wonder if I could get tied to this bill. I sure could use some of that 700 billion.

2008 Oct 01 06:28 PM

[Come on Guy...:]

IF YOU GUYS WANT TO SAVE YOUR INVESTMENT BUY A SUB TO SIRIUS WHY NOT A FEW FOR YOU FAM TOO! SHARE! ADVERTISE! THEN SIT BACK AND RECOVER!

2008 Oct 01 06:32 PM

[Mr. Stupid:]

"RECOVER????" Anyone who owned Sirius is already dead......

2008 Oct 01 07:17 PM

[holdon:]

anyone buying siri now could very much be alive(and rich) 2yrs. from now.
notice i said"could". this a spec, not for the faint hearted.

2008 Oct 01 07:30 PM

[StillHolding:]

For all you investor/subscribers, as of yesterday you can add the best of XM or Sirius to your accounts. If you were interested in one of these packages you can call and add it for $4. Better yet prepay for a year, get a discount and we can pump some funds back into the company. Finally Howard and NFL on my XM!!!

DearFederalGovernment....

2008 Oct 01 09:15 PM

[Come on Guy...:]

I agree 100% with "StillHolding" I too am still holding at a huge loss! IF YOU GUYS WANT TO SEE SOMETHING HAPPEN TO THIS STOCK, ADD MORE SUBS! UPGRADE! SHARE AND TELL EVERYONE! THIS IS THE ONLY THING THAT WILL MAKE THE STOCK GO UP! THEY NEED MONEY!! WAKE UP!!

2008 Oct 01 10:24 PM

[sl62:]

Muley...

A. I wasn't aware this was a blog about NCC??? B. Hey man, listen, you made your move, nice work. Enjoy your profits. Why bother coming back here to recruit. We heard your pitch already. Anyone jumping on your advice is gone already... Other people on this >>SIRI<< blog still believe in the company. Since you don't, might as well just mosey over to the NCC blog dude. See ya, buh bye...oh and comments like this:

>>SIRI is going nowhere for the next 6 months. There is a real downside potential of loss of revenue from current $20 subscribers downgrading to a la carte programming at $6.<<

really show your lack of skills. Seeee ya (lol)!! I'm still trying to understand why any people who don't dig this trade are here chiming in? Is it to make other people's lives miserable? To SAVE THEM from themselves? wtf??? There are only two reasons: 1. You're shorts trying to convince more jumpers, which in that case...whatever, you're entitled to your view. But the only other 2. is that you like bothering people!! Mission accomplished!! Do you feel like better people now??? What a waste of time (lol)...

2008 Oct 01 10:35 PM

[sl62:]

Tyler...thanks for the article.

Now for the believers...I just wrote about this today on Brandon's article...and what? A great article about the real SIRI. The SIRI that will be killing shorts and making believers some good money. Farewell shorts! Your time is growing "short." If I were you I would cover up now--preserve your profits and hope you had fun hoping for misery!! Run and hide and disappear into the night!! But then again, why help you? Actualllly...I would ride SIRI down to .15. Hang in there and don't cover!!! Please!!! And, don't read this article because it's not for you!! (lol)...

www.thestreet.com/_aol...

2008 Oct 01 10:55 PM

[muley101:]

I have never shorted SIRI and would not do that to you guys. I even threatened to sue Schwab if they lent my shares to short. I love you guys and am just trying to help you out with a great tip. That's all. I will be back to SIRI in the future, when the time is right. No hard feelings I hope.

2008 Oct 01 11:19 PM

[peye:]

jim cramer started all this b.s. with siri.he was on siri bandwagon trying to get the merger done with his calander on the wall and telling everybody to call senators and congressmen to get it done then when the merger happens he tells everybody to sell and buy the bonds.what he failed to mention is the small guys can't buy the bonds.he has trashed the stock ever since.he is a two face liar and i have sent many emails to him to at least explain his actions on his show but he has yet to reply.i own 7000 shares and i will hold them to the cows come home.satilite radio is not going out of bussiness and will be around long after jim cramer is gone i don't care if he lives to be 150 yrs old.i urge holders of siri to relax and our day will come.god bless

2008 Oct 02 12:22 AM

[7734graham:]

Muley....

Thanks for making the comments about the downside. Even though I do not agree with them I do think that having other opinions besides the standard "go team" blurbs are very helpful. I for one will be holding my shares for a while, I see a huge upside and a limited downside, however, the money that I have in siris could be gone tomorrow and I would still have food on the table and a roof over my head and that makes the decision a lot easier.

P.S. nice going on NCC :)

2008 Oct 02 07:30 AM

[cos1000:]

Here' some news hitting the wires this morning:

XM subscribers can add "The Best of SIRIUS" channels by calling 1-866-9SIRIXM (866-974-7496) or go to XMRadio.com for complete details. SIRIUS subscribers can add "The Best of XM" channels by calling 1-888-7BESTXM (888-723-7896), or go to SIRIUS.com for complete details.

"One of the most exciting benefits of the SIRIUS and XM merger is giving subscribers the chance to expand their subscriptions to include 'The Best of Both' services. Given the popularity of programming on both SIRIUS and XM, we expect many subscribers will upgrade their current subscriptions," said Jim Meyer, SIRIUS XM Radio President, Operations and Sales. "It's hard to imagine an XM subscriber who wouldn't be interested in adding Howard Stern and NFL games, or a SIRIUS subscriber who wouldn't want to get Oprah's channel or follow the games of the NBA and NHL, and the world's best golfers on the PGA TOUR."

2008 Oct 02 09:13 AM

[cos1000:]

And This:

A La Carte - The First Ever in Subscription Media

Today also marks the official launch of a la carte-capable radios and the unveiling of A La Carte programming packages. The first a la carte-capable radio is the SIRIUS Starmate 5 (MSRP: $129.99) now available at Best Buy, Crutchfield, RadioShack and regional retailers. Starmate 5 radios are also available at shop.sirius.com.

More information about the new programming packages and pricing for XM and SIRIUS is available online at xmradio.com and sirius.com.

I hope they put enough of these radios out there!!!

2008 Oct 02 09:14 AM

[AT57:]

Wow...I can get a Starmate 5 and it will pay for itself after about 18 months of $6/per month instead of $13/per month subscription. I'm sure there will be a run on those for Christmas. Actually, it would look better to give each of my loved ones 100 shares of SIRI. And it would only cost half of what the Starmate 5 would have cost. Either way, by Valentine's Day it will be worth less than I'd pay for it.

2008 Oct 02 05:06 PM

[Enigma:]

It is time for Americans to get all this crooks out of office ,they keep blaming wall street , but the fact is that the F.C.C. is one of the main culprits for this failing companies. i have invested in sirius like many of you and see the stock fall but i won't sell. Sirius-XM is the future of radio,unfortunately for us, we must wait for the next administration to clean house and get all this dirty politicians out of office.and by the way ,Jim Cramer two face belongs with them.isn't it great to express yourself like a real American?, you bet it is! we are so far behind in technology compared to other countries and gess whos at fault? the same politicians that betrayed us in the dot.com era. and believe me both parties are at fault! so remember,don't be fooled by the sweet talk, use your brain not your heart this Nobember.

2008 Oct 04 02:44 AM