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Siris XM Radio (NASDAQ: SIR) Is A Red Hot Stock - Fred Dunsel (03/01/12)

 March 01, 2012 01:58 PM

Last Friday, satellite radio company Sirius XM Radio (NASDAQ:SIRI) closed at $2.20, marking a 2.56% gain for the week. Since the start of the year, the company stock has increased by 20.88%, continuing its rally since last October.

Earlier this month, Sirius XM met expectations on revenues and earnings per share. In 2011, the company posted net income of $427 million on revenue of $3b billion, although growth has been noted to have slowed. Sirius XM posted a profit of $71.3 million or 1 cent a share last year.

Sirius XM's subscriber base continued to grow, with 1.7 million added last year raising it to a total of 21.8 million. The company, which implemented its first-ever subscriber price increases last month, has acknowledged that it has seen a slight increase in the rate of customer losses. Because of this, the satellite radio operator, which gets most of its subscribers through new U.S. car sales, has given a conservative estimate of adding 1.3 million new subscribers this year.

[Related -Sirius XM Holdings Inc. (SIRI): Turning The Dial To $4.20 Per Share?]

Nonetheless, analysts remain optimistic about the company's prospects, with some seeing the stock reach $3 this year. Of the Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Sirius XM is "outperform", with an average price target of $2.38. Bryan Kraft of Evercore Partners, who rated the stock as "overweight", said that the auto industry's recovery in 2012 and 2013 should also boost Sirius XM's growth prospects. James C. Goss, an analyst at Barrington Research, noted that Sirius XM "continues its progress in the key metrics that matter, including subscriber growth, conversion of trial subscribers to paying customers, revenue generation, moderating SAC (subscriber-acquisition cost) levels, EBITDA, free-cash generation improvement, and improving financial leverage ratios." Goss rated the stock as "outperform" with a 12-month price target of $3 a share. Citigroup analyst Jason Bazinet reiterated his "buy" rating for Sirius XM, while raising the target price to $2.50.

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