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FCC Steps In On Sirius XM Radio (NASDAQ: SIRI)

 May 10, 2012 12:24 PM
 


(By Fred Dunsel) Sirius XM Radio Inc. (NASDAQ:SIRI) closed at $2.16 last Friday, marking a 2.3% decline for the week. While the stock is currently up 18.7% for the year, it has been trading around $2.14-$2.40 for the past two months. Moreover, after peaking at $2.40 in early April, Sirius Radio has been declining ever since.

Last week, the Federal Communications Commission (FCC) dismissed Liberty Media Corp's application to take control of Sirius Radio with its current 40% stake. (Liberty had acquired its 40% stake in 2009 as part of a deal in which it loaned the satellite radio provider $530 million to help it avoid bankruptcy. According to the FCC, Liberty's application was not "sufficient" to show that it was in control of the company. During a conference call last week, Sirius Radio CEO Mel Karmazin said that the company was not "combative" with Liberty, and that he did not know what the latter intended to do with its 40% stake. However, Karmazin also emphasized that, "if the time comes that Liberty's interests are different than the other 60% of shareholders, we will do what we have to do to protect the interest of our 60% of shareholders."

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

Notwithstanding the takeover battle, Sirius Radio posted excellent results in the first quarter. It reported net income of $107.7 million or 2 cents a share, compared to $78.1 million or 1 cent a share a year ago. It also reported revenue of $804.7 million, as compared to $622.4 million a year ago. The company also added more than 400,000 subscribers during the last quarter, making its total of paying users at an all-time high of 22.3 million. As auto sales improved, Sirius Radio said that it now expects a net increase of subscribers of 1.5 million this year.

[Related -Sirius XM Radio Inc (SIRI) Q3 Earnings Preview: Turning Down The Dial]

Given the above, analysts are optimistic about the company. Morgan Stanley gave it an "equal weight" rating with a $2.40 price target. Wunderlich raised its price target to $2.10, while Barrington Research reiterated its "outperform" rating with a $3 price target. Maxim Group also reiterated its "buy" rating.

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