Gabelli’s call noted, “We view the quarter’s results as especially strong given Sirius raised list prices in Q1 by $1.54 (or 12%) to $12.95. Subscriber ARPU +2.0% sequentially (below the 12% price increase) as the price increases only impacted 35% of subscribers, and Sirius likely used pricing promotions to mitigate churn.”
More data showed that SIRIUS XM’s net debt to trailing adjusted EBITDA now stands at 2.9-times, which is actually under the company’s own 3.0-times stated target. SIRIUS XM added 405,000 subscribers in the latest quarter and it is now at its highest count with some 22.3 million subscribers. The company also lifted its year-end target for subscribers to rise by about 1.5 million in 2012 versus a prior projection of 1.3 million new subscribers.
The Gabelli report also hints at dividends or share repurchases coming down the pipe later this year due in part to the lack of attractive acquisition targets in this satellite radio (and satellite media delivery). As far as which method the company will return money to its shareholders, “We believe shareholder returns will take the form of buybacks.”
What Gabelli is holding some merit on for its caution is that with EBITDA trading at 16.3-times its 2012 estimates it noted, “we do not believe there is a sufficient margin of safety to add to a position at current prices.”
Perhaps the larger issue is what ultimately happens with John Malone and the Liberty Media Corporation (NASDAQ: LMCA) and the effort for ‘de facto control’ as an unresolved issue.
Pandora Media, Inc. (NYSE: P) may also come under fire as CEO Mel Karmazin has said that SIRIUS plans to introduce a personalized radio service in 2012.
SIRIUS XM shares are up $0.01 today at $2.24 against a 52-week range of $1.27 to $2.44.
JON C. OGG
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