Robust 3Q for Sirius XM: Ready to Hit New High

Los Angelas, CA -- (SBWIRE) -- 11/02/2012 -- Sirius XM Radio (Nasdaq:SIRI) is finding favor with investors as the takeover winds down and starts to look more concrete. Infighting for directional control is ending and sales have picked up. Not only may the company be a good candidate for a long term investment, but also for a short term income play. Sirius XM (Nasdaq:SIRI) recently indicated some expected growth from new auto sales, as well as a de-leveraging of their balance sheet. Sirius XM Radio (NASDAQ:SIRI) edged higher in late afternoon hours, despite reporting a 28.5 percent decline in third quarter profits. The company posted net income of $74.5 million (1 cent per share), compared to $104.2 million (2 cents per share) a year earlier. However, revenue jumped 13.7 percent to $867.4 million, beating the average revenue estimate of $803 million. Sirius XM (SIRI), the granddaddy of all satellite radio, is facing an uncertain future. Sirius has approximately 22 million subscribers. Sirius has shown strong subscriber growth mainly due to strong auto sales and its deal to provide free satellite radio in all new Ford (F) models. The retention of these figures is somewhat in question as few new car owners actually subscribe after the free trial period is over. It can expect to continue to achieve growth from this area as long as auto sales remain brisk. Sirius XM being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't.

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Morgan Stanley reiterated its Equal-Weight rating on Sirius XM Radio lightly raised its price target from $2.60 to $2.85. It is the solid fundamental outlook of the company that brings them to this conclusion. Y over Y auto sales growth is one. The price increase is flowing into the sub-base without any resistance to speak of; and margins continue to look good. So the company looks healthy. Bank of America initiated coverage on Sirius XM Radio with a Buy rating and a $3.75 price objective. Bank of America believes the company's EBITDA growth through 2016 is expected to average 20% and this is the fastest of any media company.

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Sirius announced better-than-expected revenue growth in the third quarter on Thursday. Average revenue per subscriber rose to $12.14, up from $11.97 in the prior quarter. However, net income missed expectations after falling to $74.5 million, or 1 cent per share, from $104.2 million, or 2 cents per share, a year earlier. The recent third-quarter net profit included a loss on repayment of debt of $107 million. The report was an important one for the company, as it was the last one under current chief executive Mel Karmazin and came just before Liberty Media’s (NASDAQ:LMCA) completes its acquisition plans. Karmazin will step down effective February 1 next year. Liberty chief executive Greg Maffei has already formed a committee with the Sirius board of directors to find a new head for the radio, though Thursday’s report did not offer any details about the search. Liberty gave Sirius a $530 million loan to avoid bankruptcy in 2009 and has capitalized on the stake it received in return. While Karmazin was not a supporter of the takeover, his scheduled departure and the confirmation of the acquisition has opened the doors for Sirius to focus on the future under new leadership. Liberty chairman John Malone has already spoken of his plans to spin off the radio into an independent company rather than merge it into his own.

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