On Tuesday, Chrysler said that its U.S. auto sales increased 34% in March, while Ford Motor Company (F) said sales rose 5% for the month. The world's largest automaker General Motors (GM) said that U.S. sales increased 12%. Overall, consulting firm LMC Automotive projects that March auto sales will rise 6% in the U.S., to the highest levels since May 2008, prior to the financial crisis.
SiriusXM shares are up over 29% year to date and over 40% in the last 12 months. In Tuesday trading the company's shares fell more than 3% to $2.33. Currently, analysts polled by Bloomberg give the company an average price target of $2.51, with eight "buy" recommendations, four "holds" and two "sells.""I think if you strip out the valuation question and ask fundamentally, are they doing well? Yes, they are doing well," Pyykkonen said. He notes that in the used car market the company's satellite services may double in the next three-to-five years. With SiriusXM just beginning to leverage used car dealer networks to convert previously installed satellite chips into new subscribers, the company may have a strong base of prospective subscribers even if new car sales don't maintain current growth rates. "You can make the argument that even without a deal, if you hold Sirius for two to three years, the used car market could justify that valuation." Miller Tabak analyst David Joyce downgraded SiriusXM shares from "buy" to "neutral" in a Tuesday note on valuation concerns, as the company's stock rises near his $2.55 price target. "At the current price including the conversion of Liberty Capital's preferred, the stock appears to be close to fully-valued," writes Joyce. In addition, Joyce says that M&A threats lessen the prospect of SiriusXM launching share buybacks. Overall, the company has 3.76 billion shares, meaning that its $2.35 share price still gives SiriusXM a near-$9 billion market cap. Joyce echoed the argument that the company is headed in a positive direction on strong auto sales and improving finances, regardless of the M&A speculation. "SIRI benefits from factory-installed promotional period radio subscriptions, that could have a ~45% conversion factor later in the year," notes Joyce. He expects that the company will see revenue grow 12.5% to $818 million in the first quarter on 162,000 new subscribers. In 2011, SiriusXM turned free-cash-flow positive after burning cash throughout the financial crisis and just recently raised monthly subscription prices for the first time in the company's history. For more on M&A, see 5 deal ready stocks loved by hedge funds portfolio's. -- Written by Antoine Gara and Chris Ciacia in New York
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