Giving Sirius XM Credit Where Credit Is Due (SIRI)

Giving Sirius XM Credit Where Credit Is Due

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It should be fairly obvious to anyone tracking Sirius XM Radio's (Nasdaq: SIRI ) perpetually improving fundamentals, but the company isn't the credit risk it used to be.

Shares of the satellite radio provider were trading as much as 6% higher this morning after Moody's upgraded Sirius XM's credit rating.

The more attractive risk profile makes sense. Sirius XM continues to gain subscribers in a cost-effective manner. It's been profitable and cash flow positive for more than a year. It doesn't have any major debt repayment milestones -- or costly satellites to deploy -- in the near term.

Moody's new B2 corporate family rating is not investment grade. Credit rating agencies can be sticklers for that kind of thing, especially for a debt-laden company operating on thin margins in an industry with a history of minefields going off on the terrestrial side.

Sirius XM bulls can learn to live with that. The credit rating upgrade will make it that much cheaper when the time comes to refinance its existing debt.

Cynics will naturally wonder where the credit upgrades were when the company really needed a break two years ago. Sirius XM was on the brink of bankruptcy and had to decide between a pair of Machiavellian offers presented by EchoStar's (Nasdaq: SATS ) Charles Ergen and John Malone's Liberty Capital (Nasdaq: LCAPA ) . It chose Liberty Capital, but only after agreeing to hand over 40% of the company and to pay up a stiff 15% on the money it needed to get through its 2009 debt maturities and content payments.

Today's pop was enough to send the shares to within a tick of its two-year high of $2.42 established this month. Ticker-tape watchers will credit the pop to the Moody's upgrade, but the real stars here are the improving fundamentals that continue to take Sirius XM closer and closer to investment grade.

Where will Sirius XM close by the end of the year? Share your thoughts in the comment box below.

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Longtime Fool contributor Rick Munarriz is a subscriber to Sirius. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

Comments from our Foolish Readers

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Report this Comment On May 25, 2011, at 3:09 PM, topbeancounter wrote:

I trust Mel K to do a great job since he knows the radio business like no other, but some of the deals he signed to have folks lend an hour or two a week to their output I just don't understand.
Without Stern, they wouldn't be nearly as successful as they have been...
Report this Comment On May 25, 2011, at 3:22 PM, duze54 wrote:

IMO $3.00-$4.00 by year end is not out of reality as this company grows after the merger!!
Report this Comment On May 25, 2011, at 3:31 PM, janericcarl wrote:

I think SIRI will most likely reach $3.00 before the end of this year. On the longer term, it is not unreasonable to expect at least one dollar additionally every year for the next 3 years.
I am long SIRI. Not because I'm a cheerleader, but because I can make money. If that stops being the case, I'm out.
Report this Comment On May 25, 2011, at 3:41 PM, diver92 wrote:

More then likely $3.50 Plus
Report this Comment On May 25, 2011, at 7:12 PM, moseswillis wrote:

we will see $4.50 by end of year as soon as 2.0
comes out $8.50 by 2 years end.
Report this Comment On May 25, 2011, at 8:27 PM, griffjj wrote:

We'll see $2.31 sometime in the next 47 days.
Report this Comment On June 02, 2011, at 1:35 PM, Shar54 wrote:

I bought it at .99. Need I say more?

updated 10 hours ago Sponsored by:
	DOW	12,454.83	-74.92	-0.60%
	S&P 500	1,317.82	-2.86	-0.22%
	NASD	2,837.53	-1.85	-0.07%

SIRI	$1.93		-0.06	-3.02%
Sirius XM Radio		CAPS Rating:

SATS	$27.88		+0.52	+1.90%
EchoStar Corp.		CAPS Rating:

LCAPA	$0.00		+0.00	+0.00%
Liberty Media Corp…		CAPS Rating:

8

Giving Sirius XM Credit Where Credit Is Due

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Comments from our Foolish Readers

Report this Comment On May 25, 2011, at 3:09 PM, topbeancounter wrote:

Report this Comment On May 25, 2011, at 3:22 PM, duze54 wrote:

Report this Comment On May 25, 2011, at 3:31 PM, janericcarl wrote:

Report this Comment On May 25, 2011, at 3:41 PM, diver92 wrote:

Report this Comment On May 25, 2011, at 7:12 PM, moseswillis wrote:

Report this Comment On May 25, 2011, at 8:27 PM, griffjj wrote:

Report this Comment On June 02, 2011, at 1:35 PM, Shar54 wrote:

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