Not too shabby, Sirius XM Radio (NASDAQ:SIRI).
Shares of the satellite radio operator opened fractionally above the $0.25 mark this morning (and have continued up). It may seem like pocket change to you, but try telling that to investors who saw the stock trade at a mere nickel five weeks ago.
Shares of Sirius hit $0.05 each on Feb. 11, even as Liberty Media (NASDAQ:LINTA) and EchoStar (NASDAQ:SATS) were duking it out on the front porch to see which one would emerge as the company's suitor.
Liberty Media was the winner, acquiring a 40% stake in the company in exchange for its loan-shark services. Sirius XM also successfully postponed the debt maturities that were originally due in May to fat-cat creditors, including $100 million apiece to JPMorgan Chase (NYSE:JPM) and UBS (NYSE:UBS). The company has bought itself a little breathing room, even if the girdle isn't any less tight.
Sirius XM expects to top $300 million in adjusted EBITDA this year, but let's not assume that the company is within spitting distance of profitability. The "I" in EBITDA stands for interest, and the company had to pay out $61.2 million in interest payments in its most recent quarter. Sirius XM has successfully refinanced gobs of debt this year, but at higher rates. In other words, it may as well just hand that $300 million to its creditors for debt interest before it can even begin eating away at the principal.
It also doesn't help that after landing less than half of the net new subscribers that it had targeted in November for the fourth quarter, Sirius XM is abolishing its near-term subscriber guidance.
Worse yet, we're most likely deep into the first quarter in the company's history in which it loses more subscribers than it adds. The real mystery is whether its membership rolls will continue to contract throughout the rest of the year.
That's an important question. Sirius XM will continue to realize the synergies of the merger between Sirius and XM, but those savings will scale backward if the rate of satellite radio receiver activation peaked a few months ago. With churn growing and conversion rates falling, it'll take a lot more legwork on the front end to get Sirius XM moving in the right direction.
I'm not eulogizing a five-bagger -- just acknowledging the bull-bruising reality of the situation. Thankfully for investors long on Sirius, there are plenty of bear-bashing truths, too:
- Sirius XM at least added net new accounts last quarter, a feat no other entertainment subscription services (like DISH Network (NASDAQ:DISH) or TiVo (NASDAQ:TIVO)) could achieve.
- Retail sales have been slumping for several quarters now, but that may change as truly interoperable receivers -- capable of broadcasting all of XM and Sirius channels -- hit the market this year.
- Auto sales are the lifeblood of subscriber growth for Sirius XM these days. The company's growth should resume once the carmakers bounce back.
- The combined forces of Sirius and XM will be shrewd negotiators when content contracts come up, now that there is no other satellite radio outlet to bid against.
Perhaps more importantly for the bulls, the stock's move to $0.25 today takes shares back to where they were in mid-November, when the company's near-term skies were a lot darker. Relatively speaking, Sirius XM's prospects are so much brighter now.
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