By Relmor Demitrius -
A few months ago, after Q3 results, I wrote a few articles making some predictions. Sirius XM had finally broke even before adjustments, and raked in operating income for the year now totaling over 350 million in positive operating income, and 35 Million in free cash flow. With their historically best quarter ahead, Q4, and an early press release from Sirius XM (Nasdaq:SIRI) in January confirming over 65 million in free cash flow for Q4, laying the groundwork that the quarter should be a great one for the bottom line. Will Sirius XM finally report their first ever profits, AFTER adjustments are made, seems to be the question of the month. Although its too close to call, pre adjusted profits are guaranteed. With interest payments and some charges being removed from the positive operating income, a strong case can still be made for profitability in Q4, and proof of the business model can be factually confirmed, as profits finally are reaching the common stock. With a strong close on the stock price Friday of over 88 cents, and expected good news ahead, investors are finally seeing the light at the end of the tunnel.
I predicted after Q3 we would get a S&P credit upgrade based on Q4 results. Well they did indeed get a corporate credit upgrade taking them from B- to B, based simply on their Q3 results and a press release announcing some pre earnings information. Apparently S&P had seen enough. They also kept their outlook on positive, which means another upgrade can be EXPECTED within 6 months to 2 years. Although keep in mind, this upgrade only took around 5 month, so its not an exact science.
I predicted this stock would receive upgrades and analysts would up their price targets. This has occurred as well. Sirius XM has received numerous price upgrades since then, and more than a few buy rating, some initiation of coverage with a buy rating, and some moving Sirius XM from Hold to a Buy rating.
In December, JP Morgan and Bank of America also initiated coverage on Sirius XM’s debt, and started it as an extremely positive rating of “overweight”. This means that these two respected financial giants are predicting Sirius XM will make good on their debt due in future years. Its safe. This is indirectly giving a thumbs up to the business model, and of course the equity as well. The price of their debt and equity are rising dramatically from its lows.
I also predicted institutional ownership would increase. This is happening slowly but surely. Reports coming in for Q4 so far are showing over 20 to 25 million share increase in buyers versus sellers. This is just so far as well. Considering all the stagnant volume trading that occured in October to December months, this is a large amount. I expect this number to grow in Q1 reports on this huge volume surge from January to now, and as Q4 reports continue to trickle in.
So far all predictions I made on this stock after Q3 have occurred.
The stock price is too low for a company with so much potential. It was a no brainer, a very obvious call. Took no effort. It only took simple math, and an unbiased head. Why can’t the main stream media figure this company out? Well, when has the main stream media EVER figured anything out for you?
Now that the reality is destroying myth, facts are more powerful than lies, and reality is outmaneuvering fantasy, I would expect more good things to come after the Q4 report. This report should be happening around the time Liberty Media, including Liberty Capital of course, who owns 40% of Sirius XM Radio (Nasdaq:LCAPA,) reports on February 25th. I would expect Sirius XM to report first, maybe a few days earlier. Sirius XM will announce its conference call date this week, so stay tuned for more updates.
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Some side notes on the Howard Stern debacle in the main stream media this month. Believe nothing you read on the subject, except the facts. So far no new facts have presented themselves. Howard and Sirius XM are receiving great publicity for this media circus of lies and half truths. All good for business. I expect Howard Stern to be re signed at some point. He will make around the same money, but agree to allow his content on the smart phone apps, and possibly internationally as well. This would be a huge plus for Sirius XM either way.
Clearly the stock has been undervalued. My only hope is the economy does not go into double dip mode (which at this time I think it will) and consumers cannot afford to buy cars and pay for non essentials. If that happens it will have a negative effect on most equities including Sirius.
We still should see a nice bounce from here but the next few months will tell us if we can hold higher valuations for the rest of the year and going forward.
Burn, no doubt the economy is going through a fragile recovery and SXM’s future remains auto dependent, but I’ve been hearing Armegedon scenarios since last September and i just don’t see it…Feb and March historically are weak months for the market… Also, we had our Armegeddon in 2008. As long as the Fed doesn’t raise interest rates until credit frees up somewhat…I remain optimistic. Certainly if we double dip will not be good for SXM and I don’t understand folks who promote the stock as a buy for 2010 and yet call for say a double dip is imminent…doesn’t go together…just saying
Relmor, nicely written … just getting online now and see a nice spike to start the day on huge volume. I predict a Thurs Feb 25 call at 8:00 per my thread on Yahoo message board – based in part on Liberty Media call that day at 12:00. Soon after, if the numbers are what we are hoping to see, coupled with some upped guidance, I would hope Cohen, Amobi and/or Wienkes chime in to push us even higher going into Q1 and Q2.
Very nice article Rel. I think this Q4 trend in institutional buying is continuing and accelerating in the current Q … just wish there was some more current data to document that…daily volume certainly has been huge lately with the stock going up so I remain optimistic that institutions continue to buy…
R.D., where did you get all this power to make Sirius go up +.6 today? Great factual article. And a great comment on the media. I know I read everything today with a grain of salt after experiencing their treatrment of Sirius for the past 2 years.