UPDATE: Pivotal Research Group Reiterates Buy Rating, Raises PT on Sirius XM Radio
In a report published Monday, Pivotal Research Group reiterated its Buy rating on Sirius XM Radio (NASDAQ: SIRI), and slightly raised its price target from $3.45 to $3.55.
Pivotal Research Group noted, “The Copyright Royalty Board (CRB) rendered judgment on SIRI (BUY rated) music royalty fees for the next 5 years that was nicely better than our conservative expectations and well below the music industry's asking price. The judges decided that satellite radio music royalty fees would rise from 8% of gross revenue in '12 to 9% in '13 (vs. our 10% forecast), 9.5% in '14 (vs. our 11% forecast), 10% in '15 (vs. our 12% forecast), 10.5% in '16 (vs. our 13% forecast) and 11% in '17 (vs. our 13% forecast). Recall the music industry wanted an increase to 12% and eventually 20%. We view this as a nice positive for both SIRI and BUY rated LMCA, its controlling shareholder, and post the judgment we tweaked our target price higher by $0.10 to $3.55 driven by an assumption that a portion of our previous higher assumed royalty fee would flow into higher than forecast price increases. SIRI shares have been in somewhat of a holding pattern in front of this judgment and this should break the log jam, boosted by likely still solid auto sales, likely better than guidance 4Q subscriber results and their new $2B share repurchase authorization (which we expect to be completed in 2013).”
Sirius XM Radio closed on Friday at $2.91.
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