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Technology Stocks : Sirius Satellite Radio (SIRI) -- Ignore unavailable to you. Want to Upgrade?

To: Esoteric1 who wrote (1033)	11/8/2004 11:06:32 PM
From: Esoteric1	Read Replies (3) \| Respond to of 8420

Sirius Satellite Radio; 3Q Metrics Much Better Than EPS Headline; Reiterate Market Outperform Sirius Satellite Radio SIRI/NASDAQ Intraday Price (10/27/04): $3.98 12-Month Price Target: $4.75 Market Outperform Required Disclosures: A See Page 2 for Required Disclosures Kit Spring, 303-291-5201, springk@stifel.com John Ragozzino, 303-291-5321, ragozzij@stifel.com SIRI beat expectations on most of its key metrics: 3Q EPS of a loss of $0.14 missed our estimate by a penny and the Street by $0.02, due mostly to lower shares outstanding and slightly higher subscribers (662k vs our upwardly revised estimate of 558k). Similar to most subscriber models such as satellite TV and cell phone companies, subscribers are initially unprofitable because the current period revenues don't offset the full cost of acquiring a subscriber. Longer-term, the subscribers add value because the revenues over the lifetime of a subscription more than offset the SAC cost and operating costs. Key metrics in 3Q were in-line or better than expectations. In addition to better subscribers, SAC costs were down sequentially versus guidance of a significant increase ($229 per gross addition vs our estimate of $247 and a Street high of $275). Average monthly revenue per subscriber of $10.69 was up sequentially from $10.54 in 2Q. Monthly churn was down sequentially to 1.5% from 1.6% - both number are quite low for a consumer electronics subscription model. The EBITDA loss in the quarter was $126MM, below our estimate of $133MM. The only negatives were slightly higher R&D costs. Also, EBITDA including higher than expected non-cash stock option expenses was a miss ($143MM versus $139MM est). We think the improving operational metrics clearly overshadow the mild negatives. Management reiterated confidence of guidance of 1MM subs at year-end and SAC costs below $200, the latter of which is an upside surprise to Street analysts with an average estimate of about $220. Management also noted on its call that Target and KMart will soon offer Sirius. Expect press releases on these new retail distributors soon. We would use any weakness created by the EPS miss headline as a buying opportunity. Our 1-year target is $4.75. We plan to have a full note with updated financial models out later.