Deutsche Bank Increases SiriusXM Price Target 10 Cents

In a report published Wednesday, analysts at Deutsche Bank maintained their Hold rating on Sirius XM Holdings, Inc. SIRI. The price target was raised from $4.00 to $4.10. Although the company's business model and execution remain strong, the stock is fairly valued at present. The analysts expect "decelerating growth in the core business, a connected car revenue opportunity that still seems a few years away, and a low FCF yield when it's fully taxed and capex-normalized" for the company. Although Deutsche Bank does not expect Sirius XM Holdings to become a full tax payer till 2020, the analysts believe that focusing on the untaxed FCF could be misleading, since FCF could decline during 2020 to below the 2014 and 2015 levels. This decline is likely to be driven by cash taxes, as well as an increase in capex with investments in replacement satellites that the company is expected to make in late 2016 or 2017. Sirius XM Holdings reported its 1Q subscribers and EBITDA above the analysts' expectations, while FCF and revenue were in-line with the estimates. The outperformance was driven by lower expenses and self-pay churn. "Programming costs were lower than our estimate primarily due to contract resets at lower rates and a one-time expense adjustment," the analysts added.