We upgrade our recommendation on
SIRIUS XM Radio Inc.
) to Outperform based-on its record-high net subscribers'
addition in the second quarter of 2012.This improved performance
was mainly due to strong management execution on the back of rising
auto sales. We expect the company to improve in several other
operational metrics, including adjusted EBITDA, free cash flow, and
further penetration in the U.S. auto sector, in the second
Despite price rise of its services, SIRIUS XM has generated
record-breaking net subscribers' growth in the last two successive
quarters. Solid conversion rate and effective marketing strategy
helped the company to achieve this milestone. Meanwhile, the
company is currently fighting a hostile takeover bid from
Liberty Media Corp.
), its most powerful creditor.
Recently, management declared that SIRIUS XM added 622,042 net
subscribers in the just concluded second quarter of 2012. Quarterly
net subscribers' addition is an improvement of 37.6% year over
year. In the company's history The second-quarter 2012 was the best
one with respect to net subscriber addition. This astonishing net
subscriber addition helps SIRIUS XM to end the previous quarter
with a record high total subscriber base of more than 22.9
Management projected a rosy picture for the rest of 2012. SIRIUS
XM is now expecting to add 1.6 million net subscribers in 2012
compared with its previous estimation of 1.5 million net
subscribers. This is the second time that the company raised its
net subscriber addition for fiscal 2012. Similarly, the revenue
guidance for fiscal 2012 has been raised to $3.4 billion from its
earlier guidance of $3.3 billion. However, annual free cash flow
and adjusted EBITDA guidance remain same at $700 million and $875
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SIRIUS XM RADIO (SIRI): Free Stock Analysis
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