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Liberty Media Raised to Hold on Subscriber Growth Prospects

On March 9, 2016, Zacks Investment Research upgraded Liberty Media Corp. LMCA – a leading media conglomerate in the U.S – by a notch to a Zacks Rank #3 (Hold).

Liberty Media reported mixed financial results in the fourth quarter of 2015 wherein the top line surpassed the Zacks Consensus Estimate and the bottom line met the mark. The company is steadily restructuring its business with an aim to control several subscription-based businesses.

Liberty Media holds a majority stake in satellite radio broadcaster, SIRIUS XM Radio. In the fourth quarter of 2015, SIRIUS XM added 634,000 subscribers, which took the company’s total subscriber tally to 29,594,000 as of Dec 31, 2015, up 8.4% year over year. Investment in SIRIUS XM is thus expected to reign in significant financial synergies for Liberty Media over the long haul.

Liberty Media is also investing in Charter Communications Inc. in order to support the latter to complete the purchase of Time Warner Cable Inc. TWC and Bright House Networks. Liberty Media presently holds a 27.3% stake in Charter Communications. The mergers are subject to regulatory approval. The deals, if successful, are likely to benefit Charter in terms of geographic expansion and operating cost synergies, which in turn, will boost its bottom line and free cash flow.

Also, Liberty Media currently holds a 27% stake in Live Nation Entertainment, the largest concert promoter and ticketing company in the U.S. Live Nation’s diversified music and entertainment collection will be distributed over SIRIUS XM's channels while the latter’s live sports content will be available at Live Nation. This is should drive subscriber growth and add revenues for the company, going forward.

However, Liberty Media is highly dependent on subscription-based services of SIRIUS XM Holding Inc. SIRI, Live Nation Entertainment and Charter Communications Inc. CHTR. These subscription-based services, in turn, are vulnerable to economic downturns. Therefore, persisting macroeconomic fluctuations in the U.S might significantly jeopardize Liberty Media’s future financial results. 

Moreover, Liberty Media has a substantially leveraged balance sheet. At the end of 2015, the company had $201 million of cash and cash equivalents compared with $1,088 million at the end of 2014. Total debt, at 2015-end, was $6,881 million compared with $5,595 million at the end of 2014. At 2015-end, the debt-to-capitalization ratio stood at 0.27 compared with 0.21 at the end of 2014. Such high debt levels and low cash balance raise concern and may impact the company’s investment plans.

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SIRIUS XM HLDGS (SIRI): Free Stock Analysis Report
 
TIME WARNER CAB (TWC): Free Stock Analysis Report
 
CHARTER COMM-A (CHTR): Free Stock Analysis Report
 
LIBERTY MEDIA-A (LMCA): Free Stock Analysis Report
 
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