Wednesday, October 25, 2006
Signal Hill initates Coverage With a Buy
October 25, 2006
Signal Hill's Maurice McKenzie has iniated coverage about 2 weeks ago on Sirius and XM with BUY ratings.
For Sirius McKenzie notes that the company is approaching a critical mass.
Report Excerpts:
".....Sirius has maintained solid growth and has resolved 2006 legal and regulatory issues in our opinion. We expect Sirius to post sub growth over the next several years, as it leverages increasing consumer awareness, new product introductions, and deepening OEM penetration. Over the past four quarters Sirius has captured market share and continues to move toward parity and critical mass. We expect Sirius to reach sustainable cash from operations in 2007, lowering risk profile and providing meaningful upside to current valuations....."Bullet Point Notes- Expects Sirius to end year with 6.1 million subscribers. Below company guidance, but only 9% off of the record set in Q4 2005
- Exclusive programming remains a differentiator. While many Stern fans have already subscribed, there is an expectation that more casual fans will still come to the plate this Q4
- New Products. The new product line, which includes a WIFI capable device should help drive retail awareness.
- Fully Funded. Expectations are that Sirius will end 2006 with about $452 million in cash and marketable securities. An estimation of cash burn for 2007 is about $194 million. Expect Sirius to generate cash from operations for the full year 2008.
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