A Fool Looks Back

• Report this Comment On August 31, 2009, at 4:25 AM, andrys1 wrote:

  Rick, re

  "matching the Amazon.com (Nasdaq: AMZN) Kindle on 3G wireless features"

  Not quite. The Sony's 3G wireless will be a direct connect to the Sony store only (Overdrive/Library offerings through that are said to be minimal).

  The Amazon Kindle is 24/7 free cellular wireless to the entire Net. Even if slow, it is often extremely useful when out and about, away from your ocmputers. Direct access to the Net.

  This is not an unimportant factor when talking about 3G wireless features of an e-reader.

  And access to mobile-optimized sites can actually be at decent speeds.

  I do like the Sony Daily Edition's annotation feature with stylus though.

  - Andrys

  kindleworld.blogspot.com

• Report this Comment On September 01, 2009, at 1:21 PM, BullishBroker74 wrote:

  Brandon Matthews

  On any given day, there are dozens of professional stock “bashers” trolling the stock message boards and posting erroneous information on Sirius XM Radio (SIRI). Perhaps that is where Jim Cramer, CNBC and the multitude of biased financial media get their information, so with that in mind I set out to dispel some of the myths surrounding the company, by explaining the reality of things like revenue, debt and EBITDA growth.

  Our first myth involves Sirius XM debt and the battle cry of the ignorant that it is somehow excessive. As the chart I’ve embed below indicates, Sirius XM debt stands at $3.89 billion. Compare that figure to Viacom (VIA.B) at $7.37 billon, Comcast (CMCSA) at $33.04 billion, Dish Network (DISH) at $5.13 billion, Time Warner Cable (TWC) at $22.93 billion, British Sky Broadcasting (BSY) at $4.46 billion or even Direct TV (DTV) at $5.79 billion and clearly Sirius XM Radio debt is anything but excessive. [click to enlarge]

  How many times have we heard the argument that Sirius XM Radio has too many shares outstanding? First of all, there is no such thing. A company’s value is not measured in outstanding shares but rather its market cap. Once a company achieves positive free cash flow and sufficient earnings, shares can be repurchased, and Sirius XM Radio has many years ahead of it in which to implement such a plan. There are some who question the potential market cap of Sirius XM Radio. The problem is that Sirius XM Radio suffers from an identity crisis. One analyst may value the company based on media stocks, while another labels the equity consumer discretionary, while still others like myself look at the company as a subscription service like cable operators.

  Sirius XM Radio has a current market cap of $2.69 billion dollars, and commanded a combined market cap of as much as 6 billion dollars just one year ago. Compare that figure to Viacom with a $15.27 billion market cap, Comcast with $45.08 billion and Direct TV with $24.37 billion, and clearly there remains plenty of upside potential to SIRI shares.

  Based on current valuations, Sirius XM is being lumped with companies such as Clear Channel (CCO) which commands a market cap of $2.5 billion as it faces the potential of bankruptcy in the not too distant future, and which derives almost all of its revenue from advertising. It is for this reason that Sirius XM Radio shares remain undervalued and explains why some retain their negative outlook on the stock. Sirius XM Radio would be fairly valued today at $1.30 – $1.50 per share based on its debt management and increased year end EBITDA projections.

  What about Sirius XM’s future potential? Of all the stocks mentioned above, I would like to direct your attention to revenue growth. Sirius XM’s revenue growth stands at 108%, dwarfing all of the competition, and analysts expect revenue to continue to grow over 60% in 2010. As my friend “Muscle13″ points out, it’s all about EBITDA growth. It is also the one metric that critics can point to in justification of their negative bias. Even with increased EBITDA guidance, Sirius XM still falls short of having earned a higher market cap than the 6 billion it should currently be valued at. As the chart shows, the market cap values of the other company’s mentioned far surpass that of Sirius XM based on EBITDA. That is changing to the positive however, as Standard & Poors research points out in their research report:

  (Sirius XM) Management recently issued post-merger financial targets for the next five years, with 2009 subscriber growth of 20.6 million reaching 28.4 million by 2013, revenue of $2.7 billion to $4.1 billion, adjusted EBITDA of over $300 million to $1.5 billion, and free cash flow of breakeven to $1.4 billion.

  Sirius XM management had provided 5 year guidance which offers the potential of Sirius XM shares rising to as much as $7.50 in the next 5 years, as long as management can deliver. Those projections put EBITDA at 5 times its current level. Simple math tells us that $1.50 x 5 = $7.50. That’s not a bad 5 year potential return on a .65 – .70 investment and certainly a justifiable long term price target that leaves out any outrageous multiples that a sector monopoly might warrant in the future.

  There is one more myth that is beginning to make its way around the web. That is a claim that Sirius XM will soon receive a delisting notice. That is false. They will soon receive a letter of non-compliance and have at least a full year to regain compliance.

  Position: Long SIRI

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