Satellite Radio Playground

By Demian Russian

In a new research note issued today, on the heels of Sirius XM Radio’s (NASDAQ:SIRI) 2012 first quarter earnings results and conference call yesterday, Wunderlich Securities Media Analyst Matthew Harrigan raises his price target from $2.00 to $2.10 while reiterating his HOLD rating on the equity.

While Harrigan views Sirius XM management’s newly raised 2012 net subscriber guidance of 1.5 million as “possibly still conservative” in light of a developing used auto market, he sees company subscriber retention efforts across a now 22.3 million base as viscerating plausible 2012 guidance upside on sales ($3.3 Billion), EBITDA ($875 Million), and FCF ($700 Million).

Management did admit that subs on retention plans have increased without providing a precise delta, making us comfortable with only a $12.41 2013E estimated ARPU despite the nominal $14.49 January 2012 price. A game-changer could be SIRI’s more aggressive posture on new apps such as the arrangement with Google that allows it to increasingly enter Pandora’s natural habitat. This complements higher functionality on Lynx 2.0 radios.

– Matthew Harrigan, Wunderlich Securities

While Harrigan believes that Sirius XM Radio’s satellite delivery platform is the “backbone core business,” he views broadband and WiFi as natural extensions, especially in light of  the company’s “in-house abilities and unique sports and talk programming.” Harrigan views Sirius XM as “naturally positioned to extend its brand and become more platform-agnostic.” Commenting on Sirius XM’s newly released Android app update, and the app’s availability on Google’s (NASDAQ:GOOG) Google Play, Harrigan says, “This is a move that exemplifies that Sirius XM is more than a satellite radio company and is aimed directly at Pandora’s (NYSE:P) smartphone and tablet natural habitat.” Read More