UPDATE: Citigroup Raises PT to $3 on Sirius XM Radio on Potential Buybacks

Citigroup reiterated its Buy rating on Sirius XM Radio

and raised its price target from $2.50 to $3. Citigroup noted, "Based upon the current share price, the market is valuing Sirius equity at 38x trailing 2011 fully taxed free cash. But, as Sirius free cash grows and the company begins to buy back its stock, the multiple can fall while still allowing for the equity value to rise. Specifically, we estimate Sirius will spend $3.0 billion on buybacks over the next 2.5 years (through 4Q14). As such, diluted shares falling from 6,507 million shares in 2011 to 5,586 million shares in 2014E. At 15.5x our 2014 free cash estimate and 15x 2015 free cash estimate, we could see the equity value rise to $3.00 by 2014 and $3.42 in 2015." Sirius XM Radio closed at $2.57 on Monday.