Good question hedge, hopefully someone with the knowledge can enlighten us.
December 5, 2013
08:05 EDT V, MA Visa shares have reached attractive entry point, says Stifel
Stifel continues to have great confidence in Visa (V), and the firm expects its discount to MasterCard (MA) to close. The firm continues to be bullish on both stocks and keeps Buy ratings on both of them. Visa remains on Stifel's Select List.
I wrote in a previous article about how Sirius XM (SIRI) will face off with GM's OnStar service in the near future as both companies compete for the same customers and begin offering similar services. As I see it, a strategic partnership or merger with GM's (GM) OnStar would be an ideal outcome and would instantly propel Sirius XM into a huge dominant leadership position within the industry. Despite the importance of OnStar to GM's business strategy of the future, the only real way for the service to become ubiquitous is for OnStar to operate as a separate company from GM. The conflict of interest represented by GM's ownership in the company far outweigh the benefits that other vehicle manufacturers would derive from installing the service. This has and will continue to hamper OnStar's growth.
While a deal between Sirius XM and OnStar has not been actively discussed in the media, it would be a blockbuster occurrence and there is actually some indications that it might be a future possibility for both companies.
Liberty Buys OnStar - Liberty Media (LMCA), a company with far greater financial capacity than Sirius XM could purchase OnStar and integrate the service into their current offerings. Liberty already has de facto control over Sirius XM and if it were to control OnStar too, it could easily integrate the services and drive subscriber growth. The two companies are definitely more valuable as a combined entity and Liberty Media could use their expertise in subscription based business models to drive the value higher than anybody anticipates. Integrating OnStar with Sirius XM would provide a huge boost to shareholders and dramatically increase the value of the combined company. After combining the two companies, Liberty would still be free to spin off the entity, as many shareholders presume, using a Reverse Morris Trust process.
Sirius XM and OnStar are going to be facing off soon, as the business models of both companies converge and they fight over the same market. Rather than entering a long and expensive battle, the two companies would be best served by either merging or forming a strategic partnership. Together, the two companies would form a telematics and entertainment behemoth and see massive growth in the coming connected car revolution. Liberty Media could also get involved to facilitate the merger. Shareholders on all sides would benefit and Sirius XM's share price would get a huge boost.
U must be getting free cell phone, food stamps, and free bees and don't want to work. ...
The company fundamentally has two main options. Sirius XM can either use its cash to buy back shares on a massive scale, or it can institute a quarterly cash dividend. Either one of these options would be applauded by shareholders, but one option is more likely than the other.
In terms of a share buyback, Sirius XM already announced a buyback in 2012 worth $2 billion. In October 2013 Sirius XM announced a further buyback worth an additional $2 billion including a specific agreement to repurchase shares worth $500 million from Liberty Media. The company stated that the repurchases would be completed in installments, happening in November 2013, January 2014, and April 2014. But what happens after that? The share repurchases, amounting to about 10% of the company's outstanding common shares will likely continue to push shares higher. This will be fantastic for Sirius XM shareholders, but, for the company itself, there will likely be a point when shares become too overvalued to justify a continue buyback.
For this reason, Sirius XM will have to institute a dividend program. The program will likely start small, with quarterly payments, and then rise as cash flow continues to increase. The program will please Liberty Media, as they are the largest shareholder. Furthermore, Sirius XM will still be free to use any excess cash to buy back shares on the open market as conditions permit. The likely continued share buybacks will also force Sirius XM to raise the dividend payments regularly even if it simply wants to maintain a constant nominal dividend distribution.
This may have been posted but too good not to repeat.. Monday could be interesting.
Here it is:
Every week Barron's puts out a weekly periodical that is well read within the industry. Companies receiving positive profiles tend to jump in the early part of the next trading week. Sirius XM Holdings (SIRI) leads this week's list of a couple of large cap tech stocks that the magazine gives positive profiles to in the current magazine. Both could be possible movers on Monday after these positive write ups.
I have not covered Sirius since early 2012 when it was trading at $2 a share. The shares have risen some 75% since then but Barron's believes the shares could have another 50% upside.
Among the positives the article cites are the following:
• It is adding better than 500,000 subscribers a quarter and now has more customers than Comcast (CMCSA) or DirectTV (DTV).
• Most of its professional content (sports & news) does not have contracts that come up again until the end of the decade. This is good for expanding margins (now a record 30%) as the subscriber base continues to grow.
• The company could buy back up to 40% of its float over the next five years and post EPS of 30 cents in FY2015.
I also like the fact that Sirius is done with deploying its satellite network which helps cash flow as it no longer has to spend $300mm each to launch new satellites. Operating cash flow has ~doubled since the end of FY2010 and Sirius should continue to benefit as new car sales head back to pre-crisis levels (it is installed in 70% of new cars in the United States). At under $4 a share, the stock still looks enticing