By Relmor Demitrius -

Sirius XM Radio’s (NASDAQ:SIRI) stock price has been on a positive uptrend as of late.  Since January the stock has increased from 60 cents a share to $1.18 earlier last week, which is almost a double.  It closed Wednesday near its 52 week high, on high volume.  In fact, volume has increased since the new year began.  Volume picked up even more in late January when Sirius XM released a press release giving a few details to their upcoming Q4 report, which will be held before the market opens, on February 25, this Thursday.  A lot of journalists and analysts have given their opinions as to why the run has occurred.  Speculation is running high right now regarding this equity before its conference call, which incidentally will be on the same day Liberty Media is having their conference call as well.  Since Liberty Media purchased 40% of the company through Liberty Capital (Nasdaq:LCAPA) in February of 2009, Liberty and Sirius XM have had different conference call dates.  Combining the conference call dates has only seemed to add to this speculation.  As usual when speculation is running high, one should try to break down things to their most basic levels, and just try to look at facts, or at least angles that can be supported by facts.  Lets do that now and see if we can’t get a handle on this price jump.

Why has Sirius gone up so much in 2010?

Well, I don’t think there is an easy answer, as some writers are offering.  I think it is a combination of a few fact based occurrences, wrapped into the complexity of market psychology.  Interpreting these facts can lead to a logical conclusion of this recent price action.  In this interpretation I will go forward with one assumption.  That Sirius XM shares are in demand by institutional investors.  Although it is a strong assumption also supported with facts, it is still an assumption never the less at this time.  To buy any stock however, once should assume this to be true, first and foremost.

After Sirius XM released their Q2 results, the stock had traded in a downtrend.  Despite improving cash flow, cutting costs, and refinancing debt (including removing the Liberty loan of 15% entirely) the stock still could not gain new highs.  Volume began dropping, as the same price range was offered repeatedly throughout September through the month of December.  There was no real news during this period to drive the stock price.  Only doubt and fear seemed to linger.  As the date to trade over $1 approached, Sirius XM needs to trade over $1 for 10 straight trading days before March 15th to avoid being delisted by Nasdaq, of which they now have logged 5 straight days, and the stock seemed stuck in the 50 and 60 cent range, buyers seemed intent to wait it out, to see if the reverse split/bid price rule requirement situation resolved.  (more…)

By Relmor Demitrius -

Sirius XM Radio (NASDAQ:SIRI), which is 40% owned by Liberty Media (NASDAQ:LCAPA), achieved something few companies in their industry, if any, did in 2009:

They came out of 2009 in better financial shape and returned to subscriber growth during one of the most difficult economic periods possible. 2009 was a troubling time for the newly merged radio companies.  Huge debt obligations were due, the economy was in shambles, and the auto industry wasn’t selling enough cars. 

What a difference a few quarters can make.

The satellite radio company entered the year with 19 million subscribers.  After losing 500,000 subscribers in Q1 and Q2 combined, they regained 105,000 back during Q3, reversing the trend.  That leaves them with around 400,000 subs under what they started the year with as of Q3. 

Let’s run the numbers and see what Q4 will probably look like:

October through December auto sales totaled around 2,593,000 for the United States.  Penetration rate of the company’s products in these vehicles was going to be in the high 50’s, according to Mel Karmazin, CEO of Sirius XM Satellite Radio. Im going to assume 58%.  By this figure they should be adding (from the OEM channel) around 1,503,940 new subscribers, while losing around 1,053,000 from deactivations (assuming a 1.9% churn rate, lower than last quarters, but higher than Q4 of 2008).  Im giving credence to improved economic conditions, but also still accounting for a supressed economy.  1.9% churn should work for this calculation.  During the last 3 quarters churn has been 2.2%, 2.0%, and 2.0% respectively.  Assuming 1.9% in a traditionally strong churn quarter is fully reasonable given the conditions.

So from the OEM channel alone Sirius XM Radio should gain approximately 450,385 new subscribers in Q4.

Retail subscribers will affect this total however.  Last quarter SIRIUS XM Radio lost around 400,000 retail subscribers.  This is due primarily to line up changes, lag in new radios, switching to OEM promo subs, upset over royalty fees, internet charges, and confusion with the merger and bankruptcy scare.
This caused distribution, innovation, and huge marketing delays.  Sirius XM has now corrected all these problems.

In the 4th Quarter, Sirius XM Radio launched an advertising campaign to sell the brand more aggressively to consumers.  Also heavily advertised were a slew of new radios, including the Skydock, made by Audiovox Corporation (NASDAQ:VOXX), which just noted strong satellite radio sales in their quarterly report.  Reports had been circulating that Audiovox had possibly 300,000 units into the market, and expected these units to move quickly.  The Skydock appears to be a strong seller, as reflected by interest in the Skydock’s software application, which is showing high download rates. It was in the top 50 free applications from Apple for months.  Every download of this application would be for the sole purpose of activating the radio, so these numbers directly reflect an increase in subscriber numbers from Skydock alone.  Some internet sites and retailers completely sold out of the Skydock itself.

This unit allows satellite radio to play with Apple’s (NASDAQ:AAPL) Ipod and Iphone products. Also factor in another 3 months of the iPhone/iPod application, more time removed from all those mentioned negatives to consumers, and I believe retail will finally start to settle down. This would be huge to their subscriber totals because the OEM channel is now a plus again due to auto sales rebounding nicely by the end of the year.
However, trends are trends for a reason.  Until I actually see this trend reverse, I cannot assume it will simply on improving conditions of the retail market.  Best Buy, Radio Shack, and other retail outlets have been aggressively marketing these products, including the Apple Store.

With all that in mind, I’m going with a loss of 100,000 retail subscribers, a huge improvement from Q3. 

Economic conditions seem to be improving, and Sirius XM Radio has weathered 2009 far better than most, with almost the same number of subscribers it went into with.

Q4 total Subs.   : 18,865,000 subscribers
Total gain       : 350,385 new net additions
Churn            : 1.9%
Penetration Rate : 58%

Self-pay subscribers will probably uptick slightly as well.  These are the permanent customers who pay monthly for the product, and are not counting promotional subscribers in this total.  I’m looking at still under 16 million here, but with small improvements.  I am using improved economic conditions, less confusion about the company and product, and a host of new and exciting products from the company, like the recently announced XMp3i, which is a portable Mp3 player and satellite radio, the Sirius Stratus 6, which can host the a la carte packages from Sirius XM, a new Garmin/XM radio for the motorcycle, and of course the XM Skydock for the Iphone/Ipod.  Audiovoxx reporting strong sales supports this theory.  These are the same reason I expect the retail sector to lose less subscribers than last quarter.
 
My next article will be for earnings projections on Q4.

Disclosure: Long SIRI

King of All Trades Staff -

Sirius XM Radio(NASDAQ:SIRI) has received two S & P corporate credit ratings upgrades this year. In April S & P took their corporate credit rating  from CCC to CCC+, and another one in August to a B- rating.  Perception of a company’s debt load and its ability to repay that debt is vital to a company’s ability to obtain new money for refinancing existing debt for better terms, or to obtain new debt altogether.

Now this month JP Morgan (NYSE:JPM) has initiated coverage of  Sirius XM’s credit.  They have begun coverage with an over-weight rating.  Sirius XM Radio has confirmed this coverage.

This rating typically indicates the company’s debt is a reliable long term investment at this point in time.  As equities are bought and sold, so are a company’s bond issues.  It appears now that JP Morgan will cover both Sirius XM’s equity, which they have given a Neutral Rating, and now their debt as well.  JP Morgan re-initiated coverage of Sirius XM’s equity in May of 2009.

Being bullish on a company’s debt is encouraging, as the company may seek to further refinance existing debt, especially the 550 million in bonds sold in July of 2008, to facilitate the merger of the two companies, Sirius Satellite Radio, and XM Satellite Radio.  These bonds were considered “ugly financing” by investors due to the company giving lent shares along with the bonds so they could be properly hedged.  If this debt were to be refinanced with new money, the rate might come down (7%), and the lent shares (202 million against the current float) would be returned and destroyed by the company.  These shares have never counted when calculating earnings per share, but are still involved in the float.  In the Q3 quarterly report Sirius XM reported 60 million of these lent shares were returned and destroyed by the company.

Another bond issue Sirius XM might target is the other bond issue needed to facilitate the merger in July of 2008.  These 13% 770 million notes due in 2013 carry a higher interest rate, and are due sooner.  Either way, both have reasons to be targeted first, depending on managements corporate strategy.

Sirius XM was able to refinance most of its 2009 outstanding debt due to Liberty Media’s loan in February of this year.  Sirius XM’s 40% equity stake awarded to Liberty for this assistance is trading in Liberty Media’s holding company, Liberty Media Corporation Capital (NASDAQ:LCAPA).  Other tracking companies of Liberty Media include Liberty Media Corporation – Interactive (NASDAQ:LINTA), (NASDAQ:LINTB), Liberty Media Corporation – Starz, (NASDAQ:LSTZA), (NASDAQ:LSTZB), and Liberty Media Corporation Capital (NASDAQ:LCAPA), (NASDAQ:LCAPB).  Liberty also owns the controlling interest in Worldspace, Inc. (OTC:WRSPQ).

(more…)

By Rick King -

Surprising investors – Sirius XM Radio (NASDAQ: SIRI), which hosts programming for Howard Stern, Rosie O’Donnell, Opie & Anthony, and Oprah Winfrey, anounced break-even earnings for the first time since the merger of Sirius and XM Radio this past year.  Wall Street had mainly expected a 2 cent loss and investors were waiting anxiously in the aisles this morning during it’s Q3 FY09 Conference Call.  Even through the difficult economic crisis of this past year, the company continues to show signs of continued growth as it improves its finances and minimizes operating costs each quarter. (more…)