We initiate coverage for SIRIUS XM Radio Inc. (SIRI) with a Neutral recommendation, which means the stock will perform mostly in line with the broader market. Severe global economic downturn has significantly affected the company. Slowdown in the auto industry, the major revenue generating source for SIRIUS XM together with the emergence of alternatives to satellite radio broadcast has significantly stretched the company’s top-line. As a result of an extremely challenging economic condition, most of the auto makers have experienced a sharp decline in sales, reduced production as well as severe financial difficulties. This situation had negatively impacted subscriber growth of SIRIUS XM in both 2008 and 2009.

Furthermore, SIRIUS XM is highly leveraged. That generates huge interest costs. Since its inception in 1990, SIRIUS XM has never achieved profitability in any single quarter. Cumulative net losses of the company are expected to grow in future as SIRIUS XM is making payments under various contracts Incorporatedurring marketing and subscriber acquisition costs and making interest payments on its huge debt burden. Failure to generate sufficient revenue to become profitable may push the company into serious trouble in the near future.

Nevertheless, according to our assessment, the global economy may see some revival in 2010 albeit at a very slow pace. This may provide the necessary boost to SIRIUS XM’s top-line. Recently, Standard & Poor’s Ratings Services upped SIRIUS XM’s credit rating outlook to Positive from Stable. This means that the company’s rating may be raised over the next six months to two years. At present, SIRIUS XM’s credit rating remains in “junk” bond category. The rating agency also affirmed SIRIUS XM’s B- corporate credit rating. This rating covers the company’s overall creditworthiness and means SIRIUS XM currently can meet its financial obligations

Zacks Investment Research

1. (FTI) FMC Technologies Inc Initiated at NeutralWe are initiating coverage on FMC Technologies Inc. (FTI) with a Neutral recommendation and a...
2. (WIN) Windstream Corporation Initiated as NeutralWe initiate our coverage on Windstream Corporation (WIN) with a Neutral recommendation. The company is...
3. (SIRI) SIRIUS XM Radio Reports Mixed ResultsSIRIUS XM Radio Inc. (SIRI) reported third quarter 2009 financial results. Quarterly revenue of $618.7...
4. (SCG) SCANA Corporation Coverage Initiated at NeutralWe are initiating coverage on SCANA Corp. (SCG) with a Neutral recommendation and a target...
5. (CBS) CBS Switches Off Radio – agreed to sell four of its radio stationsYesterday, CBS Corp. (CBS) agreed to sell four of its radio stations – KINK-FM, KUPL-FM,...
6. (SIRI) Echostar’s (SATS) Power PlaysFor market outsiders who don’t relish the chess game of corporate finance, headlines don’t always...

Search Posts by Tag: SIRI | SIRIUS XM Radio Inc | Broadcasting - Radio | Services

RSS Feeds by Tag: SIRI | SIRIUS XM Radio Inc | Broadcasting - Radio | Services |

Other Posts by: vitalstocks | RSS Feed for this author