Sirius XM Radio Inc. (NASDAQ:SIRI) has a bullish outlook, according to Goldman Sachs Equity Research and Zacks. This is despite losing a legal battle to stop Sirius’s takeover by Liberty Media Corp. (NASDAQ:LMCA), which now has controlling interest of the company. Sirius’s first quarter financial results for 2013 will not be released until April 30th before the opening bell.
Goldman Sachs analysts Mathew Niknam, Jason Armstrong, and Dan Pellegrinelli estimate that Sirius will outperform the consensus because they factor in better auto sales, margins, and FCF/share growth, according ValueWalk. The Goldman Sachs analysts believe that Sirius will achieve more than 9.5 percent in self-pay subscriber growth. This is important because Zacks notes that General Motors Co. (NYSE:GM) has stopped promotional payments to Sirius.
Mathew Nikman and his fellow analysts believe there was slower ARPU growth at Sirius this first quarter of the year. This is due to a 2013 increase in music royalty fees. However, Sirius did increase its subscription rate last year, so this will not have a large impact. The analysts estimate this puts Sirius’s ARPU growth set to decline from +44 percent from last quarter to +2.2 percent for the first quarter this year…
The Goldman Sachs analysts wrote in a note to investors that, “Despite a more guarded outlook into the 1Q print, we believe 2013 remain conservative, and continue to see upside. We expect SIRI to utilize FCF and an under-levered balance sheet (2.7x leverage, below the 3.0x low end of company targets) to aggressively repurchase shares, shrinking share count nearly 20 percent through 2015 and roughly 50 percent the next ten years.” They also noted that they believe Sirius already started repurchasing shares worth $375 million this first quarter. The analysts conclusion was a buy rating with a $3.50 price target.
In its analysis, Zacks said that Sirius holds about 70 percent of new car market share for subscription radio service. As they mature, Pandora Media Inc. (NYSE:P) and other competing, streaming radio services could start to become viable alternatives to Sirius. The company has released “MySXM,” an interactive Internet radio service to help counter this threat. Ultimately, Zacks upgraded Sirius to neutral from hold, noting that Sirius owns a network of satellites that can reach anywhere in the United States.
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