by Demian Russian
Murray Arenson, BGB Securities
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. 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.
BGB Securities Media Analyst, Murray Arenson is scheduled to be a guest on next week’s Satwaves Radio Show. Satwaves Radio can be heard live every Wednesday night at 9:00PM Eastern. Previous episodes of the show can also be streamed and downloaded as an Mp3 file or via iTunes. Further information about Satwaves Radio can be found at the Satwaves Radio Home Page.
Position: Long SIRI
Contact the Author: demianrussian@satwaves.com
Thanks ;-}
Thank you for the article!
;-}
Nice! Can’t wait to hear from him next week.
Arenson does value Sirius XM’s approximately $8 billion in NOL’s (net operating loss carryforwards) in his model……Please take notes WSJ!
Id like to have an idea of how many subs he thinks siriusXm will have 5 years down the road. Also, Id like to know what he predicts as an estimated pps of siriusXm in that same time frame.
Id like to know his thoughts on the overhanging delisting concerns (although i dont think there is much to be concerned about) id like to know if in his opinion how much this is weighing in on current pps.
tune in next week to find out..
Well, using 18.8 million subs now, an estimated 19.3 million by the end of the year (500,000 estimated to be added), that’s around a 2.66% increase per year.
Doing some middle school math, that’s 19.3 million at the end of 2010,
513,380 new subs in 2011 for 19,813,380, 527,035 new subs in 2012 for 20,340,416, 541,055 new subs in 2013 for 20,881,471, and 555,447 new subs in 2014 for a total of 21,436,918 at the end of 2014.
This is about as low of a number as can be expected I would think, as it doesn’t take into account any further increase in new or used car sales from 2010 through 2014, keeping the 2.66% increase as a constant, with compounding.
Murray Arenson actually waits for current data to make “his” analyzation, while Matthew Harrigan speculates. This is the difference.
It seems every downgrade posted drives the stock down with lightling SPEED! These upgrades do nothing from these small companies. To me thats fear! Invest long in SIRI and worry about neither of these flip-flop buy-sell recommendations. Is SIRIUS a medium to stay, HOWARD says so and I agree. Like Warren Buffett stated paraphraing of course – do not buy stock in a company that you do not understand how it works!
Join the club Mr. Arenson, the party has just begun.
Murray is not new…he was the media analyst at Janco…he just moved. He has extensive experience with Sirius XM
Who’s on tonight Brandon?
Recon youre right. Everytime something negative comes out the stock gets hit hard but the positive news barely brings it up a penny. People want this company to fail so bad they cant stand it. This company is going to be debt free and making cash hand over fist in the next few years and i promise you that the haters will have been weeded out and all of us that held in from the start will be rewarded. Its just a matter of time.
Same as gas prices – must be a realationship there somewhere. I think that volatility will slow down as the qtrs roll in validating a sound balance sheet and out performing the sub expectation – we will prevail. Keep the faith – bought alot on the way down; at the bottom and on the way up. It is a good product and worth owning.
I believe Mr. Arenson is correct and conservative. If Sirius keeps hammering on the fundamentals combined with the auto industry improving I believe they will far exceed his target price and 1.50+ is in order.
Note Ford alone projects something like 11.5 – 12.5M and they appear to be beating that projection. If Sirius exceeds expectations this qtr and the next combined with focused debt reduction there is a verifiable demonstration of their soundness – I believe Mr. Arenson’s call is very safe – it would be nice to see a risk weighed set of targets. Let’s go Mel make a little noise – talk it up and let’s get it going.
Hey Mel…while you’re at …activate all satrads in used cars for 1 month….Free……Once you’ve tasted sxm you cant go back to terra-infima without losing your mind
You are correct – my receiver died and while I was waiting for a replacement I noticed how much I really enjoyed the content and clear signal quality – we still have some issues – but you cannot go back once you have it. You are right, give some free air time and they will be believers………..
I didn’t believe a word of what he said. you asking him those questions last night… you could tell in the sound of his voice not only did he lie but he didn’t want to answer the questions. HE WAS PAID A SOLID PORTION TO CALL SIRIUS A SELL WHEN WE WERE ON OUT 8TH DAY! HE KNEW EXACTLY WHAT IT WAS GOING TO DO. BULLSHIT! BULLSHIT when it comes down to it. He lied to you guys and it is so simple to hear him fumble his words around. Someone paid good money for his downgrade. he is a low life just like everyone else who manipulates this stock price. I hope Terrestrial radio dies for putting everyone through this. FCC is low life’s and it’s amazing how keeping this stock down is also hurting the economy.
A lot of people. Millions of people maybe will make a good profit if they let this stock price go to were it should be at, and they won’t allow it because they are not making the money. They want everyone to sell so they can buy cheap and raise the price. It’s disgusting. EVERYTHING IN THIS WORLD IS GREED. I WILL NEVER SELL MY SHARES! BRING IT DOWN TO .20 CENTS IF YOU WANT. I’LL JUST BUY MORE.
I think I understand your sentiment, however, what doesn’t make sense is on one hand you are wanting them to stop bashing sirius and to stop trying to get sirius to fail. Then on the other hand, you say it’s ok to send it down to 20 cents.
If you want this to go up…BUY !!!
I bought 1000 more shares last week.
what i mean by that is… even if they manipulate this stock to the point that it keeps on dropping… i’m just going to buy more. I will not let them scare me out of this stock and it’s potential