BMO Capital Upgrades Sirius XM Canada And Lowers PT, Cites Share Price Declines
Sirius XM Canada Holdings Inc. (TSX: XSR) was upgraded to a Market Perform rating with a lowered $4.25 price target on Thursday by BMO Capital Markets based on its current valuation metrics.
"We are upgrading our investment rating on SiriusXM Canada to Market Perform from Underperform based on share price declines. Q1/F16 results were in line and our earnings and cash flow profile is unchanged," the firm commented.
The firm noted that Sirius XM Canada's Q1/F16 financial results were "in line" with expectations, forecasting mid-single-digit EBITDA growth through 2017E.
Recommendations And Valuation Metrics
"We downgraded XSR to Underperform in October 2014. Since then, the shares have declined roughly 50 percent. During that period, forward-looking EV/EBITDA multiples have contracted by about 40 percent, to 8x," the firm noted.
BMO "no longer feels comfortable maintaining an Underperform." The firm's target price of $4.25 reflects ~8x 2017E EBITDA.
Q1F16 And Beyond
Sirius XM Holdings financial results were in line with expectations.
"Revenue grew 6 percent to $84 million (in line with consensus) and adjusted EBITDA increased 3 percent to $24 million (in line with consensus). EPS were $0.08 (in line with consensus) and $0.06 last year. All in, free cash flow was $10 million vs. $14 million last year," the firm commented.
"We downgraded XSR to Underperform in October of 2014. Since then, the shares have declined roughly 50 percent. During that period, forward-looking EV/EBITDA multiples have contracted by about 40 percent to ~8x. Our cash flow forecast is unchanged and we continue to have longer-term concerns regarding technology-driven substitutes to the core product," BMO concluded.
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