SiriusXM Hits 4-Yr High; Merrill, Citi See Big Buy

SiriusXM Hits 4-Yr High ; Merrill, Citi See Big Buyback

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Sirius XM: shares are trading higher Tuesday after the satellite radio company received the endorsement this morning from analysts at both Citigroup and Bank of America/Merrill Lynch.

Bank of America Merrill Lynch analyst Jessica Reif Cohen launched coverage of the company with a Buy rating and $3.75 price target . She writes that the company is “a business with scale enjoying accelerating growth due to a revived auto market.” While noting thqt there are near-term concerns around Liberty Media‘s intentions with regards to its nearly 50% stake in the company, she thinks there will be a focus on buybacks and an a tax-effective spinout of the Sirius stake to Liberty holders. The wild card, she notes, is whether CEO Mel Karmazin would stay on if the ownership structure changed. She concludes that the stock is “a compelling value.”

Citigroup analyst Jason Bazinet repeated his Buy rating on the stock, upping his target to $3 , from $2.50 . He also upped its rating on Liberty Media to Buy form Neutral, setting a price target of $121. Bazinet’s logic is similar. He notes that Liberty over the past few months has spent over $1.4 billion to boot its stake in Sirius to 49.6% from 40%. The analyst expects Liberty will cross the 50% level later this year. Once that happens, he sees three alternatives : The company launches a “reverse Morris Trust” transaction (basically spinning off the Sirius stake to holders) ; Sirius launch a repurchase program followed by a reverse Morris Trust deal in 2014 ; or a big stock repurchase but no reverse Morris Trust . His thinking is that Liberty will not immediately undertake a Morris Trust transaction. Ergo, he thinks Sirius will instead launch a $3 billion stock repurchase program.

Oct 02 2012 Source: http://www.forbes.com/sites/ericsavitz/2012/1...r=yahootix

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$SIRI