Barrington Research analyst James Goss this morning repeated his Outperform rating on Sirius XM (SIRI), lifting his target on the stock to $1.50, from $1.25.
“Sirius XM continues to develop an improving fundamental story,” he writes in a research report. “As we have noted in recent quarters, the key driver of subscriber growth is the OEM side of the business, making up for continuing erosion on the retail side. Subscriber dynamics are substantially different between these categories. Even with a very impressive conversion rate of 46.7% of paid promotional OEM subscribers deciding to become self-paying subscribers, an even more sizable 53.7% of paid promotional subscribers come off the subscriber rolls each quarter. In addition, a monthly churn rate of just under 2% implies that Sirius XM needs to continually replace nearly one quarter of its subscriber base each year just to stay even – a daunting task.”
But he thinks the company is up to the challenge.
“Can Sirius XM continue to generate subscriber growth in the face of this increasingly difficult challenge?” he asks. “We feel it can…Further, as we� do not allow for the nascent certified pre-owned automobile market, our assumptions are likely on the conservative side.”
Goss also notes that he thinks the company can boost EBITDA to more than $1 billion by 2013, suggesting compounded annual growth over the 2009-2013 period of 24%.
SIRI this morning is up 3 cents, or 2.6%, to $1.19.
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