By Brandon Matthews

On any given day, CNBC viewers see that for every bull, there is a bear on any given index, sector or underlying equity. It is no different for Sirius XM analysts. It seems that Wall Street is beginning to take notice of Sirius XM Radio(SIRI) again. There has been a war raging on between the bulls and the bears for quite some time, with the bears having achieved total control and domination over the bulls. Recently from a technical aspect, it seems the bulls are starting to mount a comeback on the heals of an upgrade to outperform from Barrington.

Despite improvements in the company’s metrics, the bears have hung their hats on issues such as a declining automotive landscape and a high debt load, which are realistic concerns. With the automotive landscape improving, the used car market being tapped, 350 million dollars in positive E.B.I.T.D.A. expected this year and the launch of the highly anticipated Apple iPhone and iPod app, the only thing left for the bears to fall back on is the company’s debt load relative to its projected revenue growth.

The company appears to be taking that issue on with new found resolve, with the recent announcement of a bond offering that will restructure most of XM’s high interest debt (15%). Both S & P and Moody’s have given Sirius XM another look. The tone of each firms analysts have become much more positive, as if to fire a warning shot of potential upgrades should the company successfully navigate short term operational issues, mostly revolving around the slowdowns in auto sales. Tuna Amobi of Standard & Poors issued a note early this week stating in part that:

“…we think the company’s ability to refinance maturing debt…suggests continued thawing of the credit market, effectively buying more time to navigate near-term operational challenges. We view current credit conditions in sharp contrast to just a few months ago…”

Moody’s even managed to sneak in an upgrade of sorts, while reiterating that the company’s credit outlook remains positive. Moody’s stated in a release that:

“The upgrade of Sirius XM’s speculative grade liquidity rating to SGL-3 from SGL-4 reflects the reduction in near term maturities due to the $350 million bond offering. Moody’s expects the company’s cash…will be sufficient to fund any cash burn and approximately $266 million of maturities over the next 12 months.

The positive rating outlook reflects the improved potential for Sirius XM to address its near term maturities and allow additional time to combine the XM and Sirius operations and realize the cost saving benefits from the merger…”

The charts would indicate that some bears have taken this as a cue to walk away slowly. Clearly an uptrend has begun in the last several sessions. To those that are betting against Sirius XM, it may be time to cash in your chips, before everyone else does.

Position: Long SIRI

Tweet This Post