Wall Street continues to draw new lines in the sand when it comes to Sirius XM Radio (Nasdaq: SIRI ) . Standard & Poor's analyst Tuna Amobi is the latest to revise his price target on the satellite radio giant higher. He is sticking to his buy rating, but bumping his near-term price goal from $2 to $2.50.
This isn't pocket change. Sirius XM has 6.5 billion shares outstanding now that Liberty Capital's (Nasdaq: LCAPA ) 40% preferred share stake is in the profitable mix. Amobi's arguing that the company is worth $3.25 billion more than he thought before yesterday's conference call.
CEO Mel Karmazin's dangling the likelihood of an upcoming subscription rate increase was enough to send shares off to a fresh two-year high yesterday. Given the largely fixed overhead at Sirius XM, any additional subscription revenue will be like a Twinkie to a dieting worrywart -- it'll go right to the bottom. Sirius XM has enough in tax loss carryforwards to offset years of pretax profits. If Sirius is able to squeeze another $2 a month out of every subscriber, we're talking about nearly $500 million given its current base of 20.6 million accounts.
Testing its pricing elasticity naturally has its risks.
There are two arguments to consider. On the bearish side, there were nearly 6.4 million Sirius XM cancellations last year. A service can't be too cocky when nearly a third of its base deactivates their receivers in any given year.
This isn't pocket change. Sirius XM has 6.5 billion shares outstanding now that Liberty Capital's (Nasdaq: LCAPA ) 40% preferred share stake is in the profitable mix. Amobi's arguing that the company is worth $3.25 billion more than he thought before yesterday's conference call.
CEO Mel Karmazin's dangling the likelihood of an upcoming subscription rate increase was enough to send shares off to a fresh two-year high yesterday. Given the largely fixed overhead at Sirius XM, any additional subscription revenue will be like a Twinkie to a dieting worrywart -- it'll go right to the bottom. Sirius XM has enough in tax loss carryforwards to offset years of pretax profits. If Sirius is able to squeeze another $2 a month out of every subscriber, we're talking about nearly $500 million given its current base of 20.6 million accounts.
Testing its pricing elasticity naturally has its risks.
There are two arguments to consider. On the bearish side, there were nearly 6.4 million Sirius XM cancellations last year. A service can't be too cocky when nearly a third of its base deactivates their receivers in any given year.
0 comments:
Post a Comment