By Brandon Matthews
Several months ago, I had alerted readers to a potentially bullish pattern that was emerging with regards to Sirius XM Radio (Nasdaq: SIRI). At the time, I suggested a price target of .85 which was subsequently reached this morning. Since issuing this target based solely on technical chart patterns, there are fundamental improvements to Sirius XM’s business model that cannot be ignored in determining potential future movements. Suddenly, it seems that the rest of Wall Street has realized what we at Satwaves have been stating all along, as every day seems to bring with it additional positive equity coverage with increased price targets.
The fact is: Sirius XM survived, much to the dismay of its opposition and harshest critics. The secret I believe lies in the fact that, despite a horrible economic environment that appears to be ending, the metrics of Sirius XM’s business model held up extremely well. Auto sales declines can be seen as the single most significant factor to the company’s stalled growth of 2009, and analysts unanimously agree that Sirius XM is poised for accelerated growth as OEM sales begin to recover.
The factor that is often missed is that during the most trying economic conditions, the company’s churn rate and conversion rates held steady. In fact, churn had actually declined. This suggests that Satellite Radio consumers value the service in a way that Wall Street guru’s had underestimated. Many so called experts had predicted that more consumers that are facing economic hardship would have canceled their service in favor of free alternatives. However, like pay television, broadband internet access and bottled water, consumers by and large have elected to maintain their Satellite Radio subscriptions.
This has lead to improvements in Sirius XM’s fundamentals, such as the company achieving positive free cash flow and returning to positive subscriber growth. With no debt issues on the near term horizon, Sirius XM shares are free to run as the company continues to grow into its guidance.
For these and other reasons, I am raising my 2010 price target to $1.25 from .85.
Position: Long SIRI
Is this new target based on an EBITDA multiple or technicals. I am unclear???
EV/EBITDA
Cool Thanks. Are you going with 15 or 20 times EBITDA and on what year’s projected numbers – 2010 or 2011? Thanks!
Muscle…it was a joke…I always go on technicals
I am not knowledgeable on technicals. Though I do believe your target can be easily supported on 2011 projected EBITDA multiples. Let’s say conservatively 600 million in 2011 EBITDA times a 20 multiple gives you a 12 Bil EV take away about 3 Bil for debt plus cash gives you a 9 Bil market cap. Divide by 6.5 Bil shares and you get a $1.38 price target.
I really can’t wait to see full year 2009 EBITDA. My guess is Mel blows away the $400 million EBITDA projection.
Good article Brandon! If not forced for compliance purposes, do you still think Mel will do a voluntary RS?
Toyota factor…
also, w/ the MASSIVE recall on toyota vehicles, people will be turning to Ford. This results in more vehicles being sold w/ Sirius capabilities.
Toyota vehicles will still have SXM. People ditching their Toyotas will also have SXM, meaning, even though Toyota has halted production at specified plants, more Ford vehicles will be purchased…ie-more vehicles on the road w/ SXM.
do we see $1 before March ????
why the silence about Tuesday’s RBC meeting??
what happened at the meeting?????
RBC’s 2010 subscriber target was already exceeded by Sirius XM…RBC was way under…
They probably needed to redo their models
do you think there is a reason they didn’t issue a PR or that there has been absolute silence on the specifics of the meeting?
…seems like it may or already has impacted what has happened this week.
what’s your 1 week target? think we pull back sub-80 ?
Another solidifying article to convey that music makes the world go round and Sirius is poised to capitalize on a revived economy, auto sector and retail confidence. Great Article. Go Sirius.
what about the rbc meeting and what about the r/s what are your opinions thanks
The way the RBC meeting was “announced” made it seem to me that it was more of a leak than an announcement – as if it were more a routine meeting and not so much to develop something new.
Anyone have thoughts on this?
something suspicious about it though. We really started moving up in volume the day of the meeting. Wonder if they started to buy prior to a PR being released next week.
Up again on 4xs volume…
…still looking strong
let’s hold those shares people!
stop selling!!
Believe it or not, I got back into Sirius because of a dream. I’ve been in and out of Sirius for a long time, but recently got tired of all the up and down, up and down.
But one night a couple of weeks ago or so, I dreamed that all the continually positive news about Sirius would eventually trigger upgrades.
So I reinvested. Sure enough, a while later and upgrade came. But still not enough for a lasting move upward. Then came the good news about cashflow…and my dream started coming true.
While it may be from God, it might also be the case that my subconscious just put together everything that I was missing while I was awake, spit out the conclusion, and gave it to me in a dream.
Whaddya know!
Sirius XM Radio, Inc. (SIRI) – Subscription-based satellite radio company Sirius XM Radio attracted bullish call buyers to the February contract today. Plain-vanilla call buying is a continuation of similar activity observed during yesterday’s trading session. Sirius’s shares are trading 5.35% higher to $0.86 each as of 11:45 am ET. The stock is up nearly 41% since the first trading day of 2010 when shares stood at $0.61 apiece. Investors purchased at least 1,400 calls at the February $1.0 strike for an average premium of $0.05 per contract. Optimistic traders scooping up the call options profit if SIRI shares increase another 22% from the current price to exceed the value of the breakeven point at $1.05 by expiration next month. Option volume of 3,125 call contracts at the February $1.0 strike price exceeds existing open interest at that strike of 1,447 lots.
i would really like to know about the RBC meeting why not a single word or pr from investment relations what about thr/s Brandon what are your thouhts on these two items please respond thank you
ps.I would really like to know what you think or know thanks again
I bought a good amount of contract options last week and today at .05. Hoping we can really bust open in Feb with the Quarter results and shoot this baby up to $1.50.
I hope Sirius makes news and headlines as a stock back from the dead and in a 2 year time period climb to $5. I know it sounds like greed, but it is not. I have been with SIRI a long time and I hope they stuff it in the face of everyone who shot them down. It’s exciting to see this move and i hope by Feb everyone is happy. Don’t sell yet! stay strong. lets go higher then $1… sky is the limit with what SIRI is about to do. World Wide radio coverage from other countries and nations that can be heard by every religion every culture from indian to America. what a monopoly this company could become.
Yes – great insight about an international audience. I was thinking that very thought last night, about the specific and unique offering that Sirius brings that no other company can bring. It would cross cultures and bring in a whole other dimension of listeners. If it does become a monopoly, that would have it’s pros and cons, but until then I think we are all in for a stratifying ride.
I am not sure why you are congratulating yourself. You have been calling for a guaranteed r/s and been scary retailers for months. How can you claim you knew the stock was moving up?
The r/s IS coming, and I can prove my 85 target.
I wrote 3 separate articles on it..
Ok, so you still think the RS will happen even if not needed for compliance…despite what Mel has said…basically to reduce Cap and the advantages that go with higher price…got it.
no…I don’t think we get to a dollar before the clock runs out…
Wait a minute…that was not my question…I am trying to understand your current position: Assume we get over $1.00 for the necessary days and an RS is not necessary for compliance purposes, you are still saying that Mel with do an RS anyway? Right?
Thanks Brandon. I was confused on that since I thought you had said that we would do an RS regardless of meeting the dollar rule. Appreciate you clarifying that!
I enjoyed and agree with all you wrote in this article except one thing. Bottled Water. I can’t begin to tell you how many people I know who have switched from buying bottled water to refilling Nalgene (and other type of reusable water) bottles.
I really think the R/S is coming too but i really dont know that its needed at this point.
If the shares can gain about 16 cents in the upcoming months then it wouldnt require a R/S.
what would the benifits be of a R/S if it gets above the dollar mark? (Other than the reduced share count.)
Would it cause more buys from institutional buyers? What would the likely split be? 10/1 or higher?
Synister,
We have outlined the benefits of a reverse split in numerous articles. They are definately worth the read.
A month ago when the stock price was hovering around 60 cents, I was thinking that the split would be 1 for 20. With this most recent run up, I am thinking a simple 1 for 10 is quite sufficient. The key is to stay well above the $5 mark. That is where you draw all of your interest.
will siri business model be better with a price of 8.40? no, will there debt be lower, no. will people subscribe more, no. will they buy more commercial time, no. will it help signing howard, no. mel said for listing requirements only, i believe him. with all the positives coming out a r/s (even in strength) is way to negatively perceived. he will let the stock rise organically, as he stated, stocks do what they will do.
David, thanks for the reply. I try to read as many
articles as I can catch but miss a few once in a while.
I think the r/s would cause somemore interest in the stock
after it Is completed but I still believe the stock isn’t far
from getting to a dollar unless some really unexpected
bad news comes. I’d wait till the stock got to a dollar or more
if I was going to do r/s. If that happens I believe it could cause more to buy in
You had previously stated that an announcement coming from Sirius Friday confirming a r/s. That didn’t happen. What makes you think anyone will believe anything you say at this point? You are becoming the laughing stock of the boards. I know you won’t post this message as your board is also known for its censorship, But It makes me feel better that I was able to get your eye and let you know what people really think about you away from your peaches and cream censored board.
I agree Peanuts, If Sirius gets over 1.00 and stays there. I don’t believe that there will be a R/S because as you state, Mel said so. I think that Mel will pay down the bills and then start a stock buy back program. I think that will get the share price upto where the big boys feel better about buying it. I have been buying Sirius shares from 2002 until now and have just over 100,000 shares at an avg of .19 and would not want to see my share count go down to 10,000 just to please the big boys. Mel has stated that he wants to please the share holders and one way to do that is no R/S at any price.
allenvw, please take some profits…….you never know what the next week will bring!
Sirius delayed earnings 2 additional weeks. That means the R/S announcement would have been pushed back 2 additional weeks.
The R/S is going to happen…it’s a good thing…get used to it.
All of you people who are trying to convince people it will harm sirius are doing no good…the facts are out there..
Brandon, what date are they going to announce earnings? I haven’t seen anything official on a date for earnings or CC? Appreciate you replying with those dates…thanks.
we only know its late feb at this time..
BM, If they do a R/S, So be it. there is nothing that we share holders can do about it. I for one do not want one. If they do it, then I would hope that they will also do foward spits in the first year or 2 once the share price gets upto somewhere in the 40’s or 50’s.
It’s just that I like the value of my account going up 10 times more than if they do a 1 for 10 R/S. You know like, a 10 cent move up with 100,000 share is $10,000.00. The share price would have to go up 1.00 a share if a 1 FOR 10 R/S is done to make the same $. Maybe I dn’t understand the R/S thing like others do. I don’t feel that it is bad for the company, Just my account.
no…you don’t understand it…the percentage moves are the same, price does not matter
Brandon, I know, you have heard this countless times, but now seems to be a particularly watershed moment to again, thank all the bright and generous minds at Satwaves (as well as the readers who contribute). This site has calmed fears not through propaganda, but through studied perspective and heated, but informed dialogue. We have all profited, on many fronts. Much appreciated.
Brandon wrote: “Sirius delayed earnings 2 additional weeks.”
Question – does this mean earnings are no longer Feb. 4th?
I totally disagree with the R/S being a good thing for retail shareholders. Yes taking the stock above $5 does allow for the big boys to come in. BUT, this is at the expense of the current shareholders. A say 10 to 1 R/S means that instead of looking at a SP target of $1.5 to $2 by Dec 2010, is saying after a R/S the SP should be $15-$20.I find the $2 push possible by Dec. 2010 with no R/S easier to achieve. Compared to a $20 Dec. 2010 price after a R/S which seems like a much more daunting task.
which only means you have very little experience in buying or trading non penny stocks…
Brandon,My opinion- sirius management will continue to screw the unsophisticated common share holders. They need the additional two weeks to get the price down low enough to do a large r/s. this will reduce the six billion shares to 120,000,000. 50times .20 =10.00. I took my 83,000 dollar profit and got out. I think you make your own luck, anyway stand by for the biggest surprise of your life,as the big boys know exactly how to drive the price down to .20 . I will buy back in at a later date. like I said , Brandon You are right about the split, and most appreciated by me.
brandon,i think you are a smart guy,and i,am a suporter of yours,but i wish you would write that you think the r/s is going to happen and not it is going to happen,get used to it..mels steering the ship,not us.
and Mel has stated a March 15 deadline..
working backwards for the 15 day notice puts it Feb 28
The stock needs to be above 1.00 for 10 consecutive trading days…That means SIRI MUST be over a dollar by Feb 15…
That means without the dollar everyone in the world will know an announcement is imminent on Feb 16 no matter what happens…
That is assuming the company waits until the very last possible moment…
more probable is that they get it done prior to the earnings release at the end of Feb, so that the numbers will bolster institutional interest with the release..
Brandon. You still stick to your view on the reverse split being too late to avoid?
“…guess what? times up…it’s last resort time “… “you find me a qualified person…money manager, analyst or industry expert with a different opinion, and I’ll put them on the air and do a magnificent write up on it…
You won’t find one of course, because the only ones who think its a bad idea are novice investors.
worth the re-read:
http://seekingalpha.com/article/121204-sirius-xm-s-reverse-split-realities
I continue to believe a RS should be avoided – if possible by gaining an extension from Nasdaq – as fundamentals and technicals are now totally aligned toward future price appreciation of SIRI over the next six to nine months – toward and objective of 1.50. While the number of shares outstanding is substantial, SIRI’s market cap is growing intrinsically and astute investors of all stripes are becomining increasingly aware and involved. The argument that we have to have a share price above 5.00 to attract substantial institutional investment is really unproven – in my opinion – although there are certain institutions that I am sure must still adhere to this arcane restriction. Many others – however – are already invested in SIRI – placing those who remain out at a competitive disadvantage when it comes to performance.
If there is to be any RS in the future – I would recommend keeping the ratio as low as possible – no greater than 5:1 so the resulting share price is in the range between 5 to 7. Contrary to some of the opinions I have seen stated on this site – I believe share price counts a great deal – both in the perception of potential buyers and also those who are looking for short sale opportunities. Like it or not – there is a broad universe of investors who prefer large numbers of shares at a lower price per share – than fewer shares at a higher price (which is just hanging out there as a target for shorters).
Hopefully Mel – and other senior executives of SIRI with extremely large option grants – also see things this way.
My reply to ALL
THIS IS WHAT WILL HAPPEN. SIRI knows as well as everyone else that if this stock hits $1.00 10 days before it has to R/S a good amount of people are going to make a good amount of money. Mel/and the stock market is going to wait until the last possible second to bring this stock to the $1 mark, this way lots of Stock holders get out with minimal but solid profit. Once that happenes they will anounce 4th qauter results and the STOCK PROVE IS GOING TO SORE to $2-$2.50… this way it hurts anyone who wants to get back in. STAY WITH SIRI AS LONG AS YOU CAN! don’t let people scare you! YOU WILL LOSE OUT IN THE END IF YOU SELL BECAUSE YOU ARE SCARED OF THE Reverse Split.
THEY WILL TAKE EVERYONE RIGHT UP TO THE LAST MINUTE… AND WHOEVER HAS THE BALLS TO STAY IN IT… IS GOING TO PROFIT LARGELY. I don’t believe the R/S happens and if it does it won’t be the big bad 1-10 split or a 1-5 split. it will be minimal.
ME… I’M IN IT TO WIN IT!
Hey White Rose,thanks for the link. Good read on the r/s question.
I know Brandon always says that a r/s is not really bad for stock holders. I would think I would be in much better shape if my 10,000 shares were given a chance to hit $5.00 organically rather than by r/s.I feel it puts a worthless time limit on a company thats trying to grow thier stock price. IMHO.