Sirius' (SIRI) Upgrade Not Convincing

Sirius XM (NASDAQ:SIRI) was upgraded today by Gabelli & Company analyst Brett Harriss, citing what he sees as the future growth potential of the company.

One little problem with Harriss' upgrade is he's not interested in acquiring shares in Sirius, but rather in investing the play through Liberty Capital (NASDAQ:LCAPA). He said he sees Liberty trading at a 30 percent discount to its NAV.

In other words, he threw out all his numbers and reasonings, and in the end won't be investing in the common stock of Sirius. Not much of a way to back up his upgrade.

The bottom line for Harriss in his upgrade of Sirius is a perceived pricing power.

Harriss stated:

"Since inception in 2000, Satellite Radio has never increased its subscription price despite the addition of new content. Sirius customers are loyal: 1.9% monthly churn is low compared to other subscription businesses and did not spike through the recession. With a relatively modest subscription price, we think SIRI can raise prices without significantly impacting consumers’ budgets."

I think Harriss is wrong here, as proven by past responses by consumers to hefty gas prices, which are approaching significant levels.

There's also the unknown long-term impact on selling of new vehicles as well, which will slow down any growth in at least the short term for Sirius.

If Sirius raises prices (depending on the amount of course), I think we will see a backlash and consumers will think twice before going with the service, and only once in dropping it.

Harriss' conclusion only makes sense under normal economic conditions, not the difficult times we face today.

Sirius closed Thursday at $1.76, plunging $0.08, or 4.35 percent. Harriss amazingly upgraded the company to a "Buy."

Stern’s Sirius (SIRI) Lawsuit Overstated Says Citadel Securities

Citadel Securities media analyst Vijay Jayant says in a report that the lawsuit by Howard Stern against Sirius XM Radio (NASDAQ:SIRI) is being "overstated," and he maintains a "Neutral" rating on the stock.

"In his report, Jayant lays out a 'worst-case scenario' for what the potential impact could be from the lawsuit. In this 'worse-case scenario' XM subscribers are included in the 'total' subscriber number. At year-end 2008, Sirius XM had amassed 19 million subscribers. This would place 'total' subscribers at 10 million over the original expectation of 7.2 million subscribers. Jayant estimates this 'worst-case scenario' obligation to Sirius XM would be $370 million. He calculates this by assuming $84 million for every incremental 2 million subscribers in addition to a 10% agent consulting fee. He then calculates in a 5% simple interest rate and comes up with a 'worst-case' potential share award of $425 million. This equates to $0.04 a share (after tax) or about $260 million at current prices. Jayant notes that this potential stock award to Stern could dilute Liberty Capital’s (NASDAQ:LCAPA) stake by -145bp," noted Seeking Alpha.

"While Jayant believes the potential impact from the earthquake in Japan on auto sales, and thus Sirius XM, will be “modest,” he estimates every week of halted vehicle and parts production in Japan could result in -20,000 lower gross subscriber additions. He notes that this would not likely begin until May, assuming auto dealerships hold 2 months of inventory. While he is lowering his 2Q subscriber forecast in light of this, he is also raising his 1Q forecast due to strong vehicle sales in January and February," they added.

Sirius closed the same as the prior trading session on Monday, at $1.72 a share. Jayant has a price target of $2 on the company.




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Sirius (SIRI), Liberty Capital (LCAPA) Maintain Ratings from Wunderlich

Wunderlich Securities’ analyst Matthew Harrigan issued research reports today on Sirius XM Radio (NASDAQ:SIRI) and Liberty Capital (NASDAQ:LCAPA), whereby he maintains his "Buy" rating on both companies.

Harrigan said about competition for Sirius:

"Pandora is forcing more attention on competition within the vehicle, with an emerging consensus that it is SIRI’s content, convenience, and $80K+ income demo that relegates Pandora to more of a complementary position rather than the hard economics of wireless broadband audio streaming.

"The point here is not that individual OEM initiatives such as Ford Synch are satellite radio killers but that flux in conversion ratio has to be anticipated — even if SAAR growth and the used market opportunity should offset much of the decline."

Concerning the impact of Sirius on Liberty Capital, which has a 40 percent stake in the copany, Harrison noted he doesn't see any major moves coming from Liberty Capital towards Sirius in the near term.

Rather than increasing its stake or making a full tender offer for Sirius, Harrison said he thinks Liberty will purchase back its own discounted shares. “We expect Liberty to instead continue to focus on acquiring discounted LCAPA shares,” Harrigan concluded.

Sirius was trading at $1.79, up $0.021 or 1.19 percent, as of 2:48 PM EST. Liberty Capital was trading at $73.20, up $0.75, or 1.04 percent.

Barclays on Starz (Nasdaq:LSTZA), Liberty Capital (Nasdaq:LCAPA) Sirius XM (Nasdaq:SIRI)

Barclays (NYSE:BCS) gave their take on three companies within the U.S. Cable & Satellite Communications sector, which included Starz (Nasdaq:LSTZA), Liberty Capital (Nasdaq:LCAPA) and Sirius XM (Nasdaq:SIRI).

They said, "LSTZA: Over The Top (OTT) Revenue Prospect Remains Key Value Driver. We continue to view Starz's prospects for material OTT revenue as the company's key incremental value driver. We are forecasting $160MM in annualized OTT revenue starting in mid-2011. We highlight that the makeup of that revenue is highly uncertain. It could be a large deal with Netflix, a series of smaller deals
with other OTT players (i.e. Amazon, Google, etc.), or a combination of the two. Our total OTT revenue forecast is less than Epix's deal with Netflix, as Starz can't offer the exclusivity that Epix offered.

"LCAPA Value Remains Driven by SIRI Shares; Long Term, Expect Distribution Similar to DTV. SIRI shares remain the bulk of LCAPA value (45% of gross assets), and have been the primary driver of LCAPA's share performance YTD (SIRI up 133%, LCAPA up 148%, vs. 12% for the S&P 500). Long term, we expect Liberty to distribute the SIRI shares to LCAPA shareholders in a transaction similar to the DTV distribution."

Starz closed Monday at $66.54, down $0.12, or 0.18 percent. Liberty Capital closed at $58.56, down $0.55, or 0.93 percent. Sirius XM closed at $1.4050, up $0.0050, or 0.36 percent.