SIRIUS Gaining on Guidance, Doubting 'The Quadruple Call' (SIRI)

SIRIUS XM Radio Inc. (NASDAQ: SIRI) is surging this morning on what many might consider a mixed earnings report.  The solid part of the report was a new record of $0.03 EPS versus a Thomson Reuters estimate of $0.01 EPS.  The mediocre part of the report was in revenues, where the report came to $744 million versus estimates of $753.5 million.  Mel Karmazin and friends now have over 21 million subscribers after adding more than 452,000 subscribers in the quarter, which seems to be well above the unofficial consensus on subscriber growth.

What is driving the stock is an improved outlook on subscriber growth to1.6 million versus 1.4 million previously offered.  Mel Karmazin kept the revenue target at roughly $3 billion.  The earnings mumbo-jumbo from the EBITDA target was also kept at roughly $715 million.

What is interesting is that TheStreet.com has a report out with one manager calling for SIRIUS XM shares to literally quadruple to as much as $8.00 over the next three-year period as it can add subscribers without having massively higher costs.  By our take, SIRIUS XM shares could double but it would only be in conjunction with a bull market similar to the late 1990’s into 2000. It would also take cleaning up the John Malone ownership and would require even more constructive debt refinancing on the part of the company.

The metrics here are the driver as well.  Self-pay net add-ons came to 362,663, up 19%. Churn was stable at 1.9% versus 2.0% sequentially and 1.8% a year earlier; Subscriber acquisition cost was $54 versus $59 a year earlier.

SIRIUS XM shares are trading up almost 4% this morning at $2.19 and its 52-week trading range is $0.95 to $2.44.

JON C. OGG