Weighing in ahead of Sirius XM Radio’s (NASDAQ:SIRI) Q2 earnings release, scheduled for Thursday, July 25th, 2013, Maxim Group Senior Media Analyst John Tinker reiterates a BUY rating and raises his price target on the equity from $4.20 to $4.60.
We believe that investors have not yet fully factored in the potential for used car additions increasing the overall potential market size.
– John Tinker, Senior Media Analyst, Maxim Group
In a new research report issued today, Tinker sees the used vehicle segment as being “the next big thing” for Sirius XM Radio. While SIRI has historically traded in part on strengthening new vehicle SAAR numbers, he views the used vehicle segment becoming a driving growth factor for Sirius XM in the coming years, and this market growth potential as not yet fully understood by investors.
Tinker estimates the total addressable market of Sirius XM-equipped vehicles to be ~100 Million and Sirius XM’s total subscriber number to grow from todays ~25 Million to 35 Million by 2017. This would equate to 13% of total vehicles on the road in the U.S. and 35% of vehicles with Sirius XM installed.
Tinker is estimating Sirius XM to grow revenue by 12.6% year-over-year to $3.84 Billion for full-year 2013, 12.3% year-over-year to $4.31 Billion for full-year 2014, and 9.4% year-over-year to $4.72 Billion for full-yearr 2015. He estimates EBITDA growth of 29% year-over-year to $1.14 Billion for full-year 2013, 29% year-over-year to $1.47 Billion for full-year 2014, and 19.3% to $1.75 Billion in 2015.
Tinker’s new $4.60 price target is based on 20x full-year 2014 estimated FCF (Free Cash Flow) of $0.23/per share. Applying a 20x multiple to Tinker’s estimated full-year 2015 FCF of $0.30/per share results in a $6.00 share price.
Previous Playground Radio interviews with Maxim Group Senior Media Analyst John Tinker are available for streaming or download.
Disclosure: Long SIRI