With SiriusXM issuing guidance today it becomes much easier to step back and visit valuation models while carrying baseline assumptions vs. a more slightly bullish model. When I look to establish a price target on an equity I like to use the Enterprise Value to EBITDA method. This type of model gives me a valuation that is based partly upon and considers EBITDA growth and EBITDA is the yardstick by which most media companies are valued.
There are many moving parts — these include a shifting competitive landscape, auto sales, Liberty media (and its goals), share buybacks, credit facilities, a satellite launch, expansion, and many other components. While all of these can help impact the value of the company, it is the baseline of company guidance that essentially sets the foundation. In arriving at a price target I build several models based on various share counts, debt loads, cash, guidance, and the amount by which I feel the company can exceed guidance