Bank of America Reiterates Buy Rating on Sirius XM Radio on Buying Opportunity

In a report published Monday, Bank of America analyst Jessica Reif Cohen reiterated a Buy rating and $4.00 price target on Sirius XM Radio SIRI.

In the report, Bank of America noted, “Our SIRI thesis is buttressed by: (1) the company's unique competitive position (Pandora, Spotify, Apple, etc., not true threats in our view); (2) rapid growth despite a large sub base; (3) low churn, indicative of a highly inelastic business; (4) a unique cost structure, heavily fixed in nature, yielding best-in-class contribution margins; (5) improving financials, with EBITDA margins likely to exceed the company's LT goal of 40% (1Q'13 was a record for both nominal EBITDA dollars and margins, which reached 30%); (6) reasonable valuation considering outsized growth relative to the media industry; (7) an improving auto-market (BofAML auto analyst John Murphy maintains his bullish outlook, projecting SAAR to reach 18mn by 2018); and (8) a relatively untapped secondary-auto opportunity (we give the company little credit for the ~35mn secondary autos sold every year in the U.S.). SIRI has surpassed virtually all fundamental projections we have made since reinstating coverage in Oct. 2012, and appears to be gaining momentum (FCF guidance was recently raised, from $900mn in CY ‘13E to $915mn).”

Sirius XM Radio closed on Friday at $3.15.