We downgrade our recommendation on
SIRIUS XM Radio Inc.
(
SIRI
) to Neutral based on its current valuation, which soared nearly
80% in the last year. We believe this high level of valuation may
restrict above market gain anytime soon.
Fourth quarter -2011 financial results were mostly in line with
the Zacks Consensus Estimates. During 2011, the company achieved
several operating milestones, including significant net subscriber
addition, record-high adjusted EBITDA and free cash flow
generation, growing penetration in the auto sector.
Management predicted that this positive momentum will further
intensify in 2012 and accordingly projected a healthy financial
outlook. We believe introduction of Satellite Radio 2.0 and recent
price increase will boost the company's financials going
forward.
Despite higher programming cost and stiff competition from
several media players, such as
Pandora Media Inc.
(
P
) and
Cumulus Media Inc.
(
CMLS
) we believe that the company will perform well mainly due to
increased programming lineups and improved ratings.
In December 2011, SIRIUS XM launched SIRIUS XM 2.0 product suite
in the retail channel. SIRIUS XM 2.0 will include WiFi, Bluetooth,
Internet, and will expand its existing bandwidth by 25%. It will
also include features such as time shifting, replay, pause, rewind,
and will be software upgradeable.
SIRIUS XM 2.0 will enhance the audio content line up of the
company with new channels. The company has also launched few
Mexican and Latin channels that include Spanish news channels and
also provides Spanish-language sports commentary, hence catering to
the different needs of the society.
Recently, the company has launched an upgradeable version of
SIRIUS XM 2.0 called "Lynx" a next generation satellite receiver
that allows the subscribers to stream content to home audio systems
via Bluetooth. It will also provide high-resolution touch screen
support and allows 200 hours of music storage.
CUMULUS MEDIA (
CMLS
): Free Stock Analysis Report
PANDORA MEDIA (
P
): Free Stock Analysis Report
SIRIUS XM RADIO (
SIRI
): Free Stock Analysis Report
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