Sirius XM stock is behaving as expected.
$2 billion added to existing $4 billion in share buybacks.
Look for a break of $3.50 on a good Q2 report, and a move towards $4 per share.
Given recent news and share price activity, it seems likely that shares of Sirius XM (NASDAQ:SIRI) are setting up for a move towards $4 per share after the Q2 report is released on July 29th. Approximately a month ago, I suggested that shares may consolidate for awhile leading into the impending call, and it appears that estimation was on target. Since I hold a shorter-term $3/$3.50 bull call spread that expires this week, it's time for me to revisit expectations and share some assumptions for the next month of activity.
SiriusXM Canada Announces Quarterly Dividend
CNW Group Sirius XM Canada Holdings Inc.
1 hour ago
TORONTO , July 14, 2014 /CNW/ - Sirius XM Canada Holdings Inc. ("SiriusXM Canada" or the "Company") (XSR.TO), parent of Sirius XM Canada Inc., today announced that the Company's Board of Directors has declared a cash dividend payment of C$0.1050 per Class A Share, C$0.1050 per Class C Share and C$0.0350 per Class B Share. The dividend will be payable on Aug 14, 2014 to shareholders of record at the close of business on July 29, 2014 .
The quarterly dividend on the Class A, Class C, and Class B Shares is designated as an "eligible" dividend for the purposes of the Income Tax Act ( Canada ) and any similar provincial legislation.
Class B Shares in the Company are convertible at any time at the holder's option into fully paid and non-assessable Class A Shares upon the basis of one Class A Share for three Class B Shares. The Company has issued 30,729,510 Class B Shares, which represent 10,243,170 Class A Shares based on the aforementioned conversion right. The Company has also issued 13,638,527 Class C shares. In the event that all Class B and Class C Shares are converted to Class A Shares, the total outstanding number of Class A Shares would be 127,999,902
Not sure what it means
Why the Upgrade?
Last month, Sirius XM sealed deals with Ford Motor and Chrysler Group, on June 19 and 25, respectively. Per the deals, the company will provide Ford's and Chrysler's customers with a complimentary five-year subscription to its navigation packages, SiriusXM Traffic and SiriusXM Travel Link.
Once implemented, customers of both the companies will be able to receive vital information like traffic conditions, fuel price, movie listings, sports scores and weather information through satellite from SiriusXM. We believe Sirius XM’s decision to tie up with Ford and Chrysler Group will boost the company’s top line considerably and serve as a long-term growth driver.
Over the past one year, Sirius XM’s radio penetration has increased only 3% due to lower-than-expected auto sales numbers. Thus, the company is making serious efforts to increase its radio penetration in new automobile models.
Notably, the company holds strong telematics partnerships with almost all major car manufacturers including Acura, BMW, Honda, Hyundai, Infiniti, Lexus, Nissan and Toyota.
With the market for new cars having already reached a saturation point, Sirius XM now foresees untapped potential in the second hand car market. Sirius XM has more than 12,000 dealers who have provided the company with vehicles sales information. The company is expecting to cover more than 4 million second hand cars in 2014 backed by a rising number of dealers.
We rate SIRIUS XM HOLDINGS INC (SIRI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
Despite its growing revenue, the company underperformed as compared with the industry average of 14.6%. Since the same quarter one year prior, revenues rose by 11.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
Net operating cash flow has increased to $251.39 million or 48.82% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.61%.
The gross profit margin for SIRIUS XM HOLDINGS INC is rather high; currently it is at 60.86%. Regardless of SIRI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.42% trails the industry average.
SIRIUS XM HOLDINGS INC reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SIRIUS XM HOLDINGS INC reported lower earnings of $0.06 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus $0.06).
The change in net income from the same quarter one year ago has exceeded that of the Media industry average, but is less than that of the S&P 500. The net income has decreased by 23.9% when compared to the same quarter one year ago, dropping from $123.60 million to $93.99 million.
You can view the full analysis from the report here: SIRI Ratings Report
Here's CEO David Frear:
We have 60 million cars on the road today. It'll be 150 million in 10 years. It'll be 120 million in roughly five years. And so the prospects for long-term growth are quite strong.
Frear sees used car trials not only eclipsing new car trials, but doubling them within the next 10 years.