New analyst says SiriusXM stock is overpriced


Barclays Capital’s James Ratcliffe is the latest Wall Street analyst to cover SiriusXM Radio. And while he thinks satellite radio is a good business, he began the stock at “Underweight” (sell), saying the stock is overpriced.

Ratcliffe’s target price for SiriusXM is $2.00. The stock had closed Monday (2/6) at $2.15.

“We believe the SIRI business is healthy and expect material growth in EBITDA and free cash flow [FCF], but believe, at 14x 2013 estimated EBITDA and nearly 19x 2013 estimated fully-taxed FCF,  growth is  more  than  priced  in  at  current  levels,” the analyst told clients.

Rather than owning SiriusXM shares, Ratcliffe prefers this alternative: “For investors seeking exposure to SIRI operational performance, we prefer Liberty Media which allows investors to purchase SIRI shares for a more reasonable ~$1.61, even assuming a 20% discount on Liberty’s other assets.” Liberty Media holds a 40% stake in SiriusXM.

The Barclays analyst expects that Liberty Media will split off its SiriusXM stake sometime this year.

RBR-TVBR observation: Ratcliffe could have egg on his face very quickly, since SiriusXM reports its Q4 results on Thursday (2/9) and the company has made a habit of beating its financial targets.