Tags: Sirius | XM | Radio | SIRI | satellite

Sirius XM Radio Poised for Growth, Finally

By    |   Tuesday, 10 May 2011 01:19 PM

With the release of 2011 first-quarter results, the share price of Sirius XM Radio (SIRI) has recovered to the price level the stock held when Sirius and XM Radio completed the merger of satellite-radio companies in July 2008.

The merger went through just before the 2008 and 2009 bear market, which saw Sirius lose 95 percent of its value.

With the first-quarter earnings release on May 3, revenues and earnings just missed Wall Street estimates, but investors were encouraged by the increase in subscribers and a boost in guidance concerning revenues and free cash flow.

Results from the 2011 first quarter included a 9 percent increase in revenue over the first quarter of 2010, to $724 million from $664 million, and a 15 percent increase in EBITDA, to $181 million from $158 million. Net income of 1 cent per share matched results from the first quarter of 2010.

Sirius generates more than 85 percent of revenues from subscriptions, so watch subscriber numbers closely. In the first quarter, subscriber growth was up 118 percent, as net additions increased to 373,000 from 171,000 compared to the same quarter 2010.

Total subscribers at the end of the quarter were 20.5 million, with 16.8 million of those actually paying for a subscription. The year-over-year net increase in paying subscribers was just over 1 million, a 6.6 percent increase.

The real growth driver

Beyond all of the radio personalities, 135 channels, and promotions, the real key to growth for Sirius is new-car sales. A large percentage of new cars come with a satellite radio installed and several months of a free, promotional subscription.

CEO Mel Karmazin noted in a recent press release: "Consumers are buying cars again and demand for our product is strong." Investors looking for growth for Sirius thus should watch the new-auto sales numbers as well.

Analyst Barton Crockett at Lazard Capital Markets gives Sirius a neutral rating due to mixed results in the first quarter. Gabelli & Co. has a buy rating on the stock, posting a private market value of $2.85 per share.

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With the release of 2011 first-quarter results, the share price of Sirius XM Radio (SIRI) has recovered to the price level the stock held when Sirius and XM Radio completed the merger of satellite-radio companies in July 2008. The merger went through just before the 2008...
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Tuesday, 10 May 2011 01:19 PM
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