We reaffirm our long-term Neutral recommendation on
SIRIUS XM Radio Inc.
) - the leading broadcast radio service provider in the U.S.
following its robust third-quarter 2012 results. The bottom line
of the company met the Zacks Consensus Estimate while the top
line surpassed the same.
Sirius XM reported record revenue growth on the back of higher
subscriber addition and strong growth in auto sales. Moreover, a
continuous debt reduction along with the recent authorization of
a $2 billion share repurchase plan and payment of dividend will
continue to boost shareholders' wealth in the years to come.
SIRIUS XM has a very strong business relationship with the
original equipment manufacturers. The company owns an extensive
satellite network, covering the whole U.S. that provides audio
contents through more than 170 channels.
SIRIUS XM also projected a rosy picture for the rest of 2012.
SIRIUS XM is now expecting to add 1.8 million net subscribers in
2012 compared with its previous estimation of 1.6 million net
subscribers. This is the third time that the company raised its
net subscribers' addition for fiscal 2012.
Furthermore, the company has recently raised $400 million
through the issue of senior notes due in 2022. For this new
issue, Moody's Investor Services has upgraded the company's
Corporate Family rating to B1 and Probability of default to Ba3.
On the other hand, Standard & Poor's Rating Services has
assigned its "BB" issue-level rating and "3" recovery rating. The
outlook remains stable.
Despite such positive traits, volatile macro-economic
condition coupled with stiff competition from
Pandora Media, Inc.
) and Pioneer System's newly launched car stereo called
"AVIC-X920BT", which supports Internet radio may hurt Sirius XM's
profitability going forward.
Currently, it has a Zacks #3 Rank, implying a short-term Hold
PANDORA MEDIA (P): Free Stock Analysis Report
SIRIUS XM RADIO (SIRI): Free Stock Analysis
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