by Demian Russian

BGB Securities Media Analyst, Murray Arenson initiated coverage of Sirius XM (NASDAQ:SIRI) today with a BUY rating and a $1.15 price target. In his report, Mr Arenson argues that Sirius XM “is now a solid cash flow growth story.” He notes positive subscriber growth, an improving OEM sector, penetration into the pre-owned auto market, incremental revenue from royalty pass-throughs, cost-cutting merger related synergies and a “substantially improved” balance sheet.

Arenson sees auto industry trends rebounding, and points to positive year-over-year comparisons in recent months. He notes that annual vehicle sales were in the 16-18 million range before the crash to 10.4 million in 2010. His forecast is assuming year-end auto sales for 2010 to be in the 11-12 million range.

Looking at the pre-owned vehicle market, Arenson notes that there are about 250 million vehicles currently on the road — and only 27 million of those have Satellite Radio factory installed. He views the pre-owned vehicle market as being “an important segment” to Sirius XM, and sees it growing “substantially.”  He predicts that the number of vehicles with Satellite Radio factory installed can grow from 27 million to 70 million in the next five years.

Speaking on Sirius XM’s valuation, Mr. Arenson looks at it on essentially a per subscriber basis. He looks at the value of cash flows from existing subscribers, as well as the value of cash flows coming from new subscribers being added in the next 5 years. While noting that shares of SIRI are trading at an enterprise value of 15.5x his FY10E EBITDA and 13.2x his FY11E EBITDA, Arenson does value Sirius XM’s approximately $8 billion in NOL’s (net operating loss carryforwards) in his model. “When we subtract the value of the tax shield from the current enterprise value, we see shares of SIRI trading at multiples of 10.0x and 8.6x our respective EBITDA forecasts for FY10 and FY11″, Arenson explains. READ THE FULL ARTICLE >>

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By Brandon Matthews

It began yesterday with news of a runaway Toyota (NYSE: TM) Prius on a California Highway. As this drama was playing out, Toyota executives were taking a page from the tobacco companies on Capital Hill, by claiming there was no evidence that any such thing had occurred. Subsequently, Sirius XM Radio (Nasdaq: SIRI) shares began to show strength. That strength was magnified today on news that another Toyota gas pedal had stuck, and caused a woman to crash into a stone wall.

All of this follows a 911 release of a similar incident, involving the fatal crash of an off-duty state trooper and three members of his family under similar circumstances. Toyota blamed the incident on floor mats. Yesterday’s incident occurred in a vehicle that had none. As I write this, I must confess that I am sickened by all of this. Unfortunately, I have a responsibility to my readers to report news that affects Sirius XM.

Toyota’s problems are only beginning, and have already caused a decline in its market share. There will always be some that swear by Toyota quality, yet the new generation of car buyers will attach this stigma for decades to come. I find it very unlikely that Toyota can recover from these allegations. To the contrary, I expect to see many more cases revealed going forward. Every future accident involving a Toyota or Lexus vehicle will be scrutinized by the media and at fault drivers will likely blame a stuck gas pedal or braking problem as the cause, even it was not. READ THE FULL ARTICLE >>

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By Brandon Matthews

Actual Audio Clip After The Jump

Satwaves is proud to announce that Sirius XM Radio’s (Nasdaq:SIRI) Howard Stern has taken up the issue of the FCC’s proposal to allow some wireless services to interfere with satellite radio broadcasts. Stern discussed the issue live on his show yesterday, quoting and reading directly from an article I wrote several days ago, titled “Will The FCC Interfere With Sirius XM Yet Again?.”

With a tone of disgust that should be expected of anyone now familiar with the decade long issue, Stern rightly noted that the FCC seems to go after him no matter where he is, through whatever means possible. Unfortunately, Stern fell short of mentioning Satwaves by name, and did not get into the details of our suggestion for listeners to fight for their rights….yet!

Although the FCC staff proposal has yet to be made public, one of the most disturbing aspects of the plan is an indication that includes higher limits than the WCS itself has requested. In fact, the FCC staff on its own initiative is proposing to double the limits that were requested. This is indicated in a letter penned by Sirius XM CEO Mel Karmazin, which further indicates that the staff “bluntly” expressed that interference to the Satellite Digital Audio Radio Service (SDARS) will occur. This is direct opposition to the WCS coalition defense that it will not interfere with Sirius XM broadcasts, which is what this case is all about.

READ THE FULL ARTICLE >>

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By Brandon Matthews

I really hate conspiracy theories, but you really have to question the motives of the FCC when it comes to Sirius XM Radio (Nasdaq: SIRI). It took the agency nearly 17 months to approve the merger of the two satellite radio providers, which nearly resulted in bankruptcy for the newly combined company. On March 4th, the FCC granted special temporary authority for Sirius to broadcast in Haiti for 30 days to assist in relief efforts, following the devastating earthquake which occurred in Mid-January. Now it appears that the FCC, after years of legal wranglings, is going to recommend the approval of certain wireless services in the spectrum adjacent to Satellite Radio — services that it willingly admits will cause devastating interference to Satellite Radio. Enough is enough!

Sirius XM operates its satellite radio service in the 2320-2345 MHz range. The cost of this spectrum was approximately 170 million dollars. Both Sirius and XM then spent billions of dollars to create a service which is now consumed by 35 million people in the U.S. Along the way, the FCC auctioned spectrum on both ends of the Satellite Radio spectrum, with the express condition that the services allowed could not interfere with the SDARS service. The FCC forthrightly and unequivocally stated that protecting Satellite Radio may “make mobile operations in the WCS spectrum technologically infeasible.” As a result, the entire WCS spectrum was auctioned for only 14 million dollars.

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By Brandon Matthews

Despite Sirius XM Radio (Nasdaq: SIRI) turning in an impressive 2009 report card, there are still questions surrounding the company’s debt — especially debt that will be coming due in 2013, which Bank of America/Merrill Lynch (NYSE: BAC) deemed a “debt tower” in a recent bullish report. As we have discussed on Satwaves with nearly every analyst we’ve interviewed, a lack of any debt due in the current year, combined with an improved credit rating, provides Sirius XM with an exceptional opportunity to knock down its current interest and total obligations.

The $1.8 billion 2013 debt tower includes three bond issues; $500 million in Sirius 9 5/8% Senior Notes, $526 million in XM 11.25% Senior Secured Notes and $778.5 million in XM 13% Senior Notes. Sirius XM boasts annual revenues of over $2.7 Billion, making these obligations more than manageable given the time horizon.

Within Sirius XM’s most recent 10K filing, the company has adjusted its expected long term debt obligations, which now reduce the expected 2013 debt to fall to $1.3 billion. $500 million has been moved up to 2010, although there is no obligation to do so. This suggests that the Sirius 9 5/8% bond is likely to be refinanced at the least, or potentially called and repaid. These bonds are callable on April 3rd of 2010 at 104.813. READ THE FULL ARTICLE >>

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