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Technology Stocks : Satellite Radio & Competing Technologies

SIRI 21.89

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From: i-node	4/21/2005 8:18:09 PM
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XMSR 1Q05 Preview: Expect Clarity Following Price Hike - April 21, 2005 Lucas Binder 212-713-4966 lucas.binder@ubs.com * XM Reports 1Q05 Results on April 27 XM Satellite Radio is scheduled to report 1Q05 results on Wed., April 27, 2005, with a conference call being held at 10:30am EST; the dial-in number is 800-374-0551. We expect XM to discuss the beneficial impact of its price increase and provide clarity on how subscribers have reacted. * Annual Revenue Growth of 136% on Back of Strong Subs We expect XM to report revenues of $101.6M, up 22% from 4Q04 ($83.1M) and 136% from 1Q04 ($43M). We believe the rapid sub growth already reported of 540k net adds (16.7% seq growth in subs/124% ann growth) should drive continued strength in revenues. We expect an EBITDA loss of $(101.8)M vs. $(139.7)M in 4Q04 and $(78)M in 1Q04. * Following Price Hike Announcement-Solid Sub Growth XM already announced 540k net adds during the quarter (vs. UBSe of 501k). Coupled with the prepayment that predated the 4/2 price hike, we expect greater prepayment to contribute to working capital during the quarter. Our key metric estimates are: ARPU ($9.67 up 3.4% y-y), SAC ($65 down 3.1% y-y), CPGA ($101 down 4.7% y-y), monthly calculated churn (2.6% down 80bps y-y and 3bps seq). * Valuation: Maintain Buy 2 and $40.50 price target We arrive at our target using a DCF analysis. Our DCF is based on 3% growth in perpetuity and a 10.2% WACC. Our target forward 2010E EV/EBITDA multiple is 15.6X vs. current multiple of 10.6X.

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