December 15, 2015

VALUATION WATCH: Overvalued stocks now make up 38.88% of our stocks assigned a valuation and 12.52% of those equities are calculated to be overvalued by 20% or more. Two sectors are calculated to be overvalued.

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Sirius XM Locks In The King With Long-Term Deal

Sirius XM Holdings Inc. (SIRI) is a radio broadcasting company. It creates and broadcasts commercial-free music; premier sports and live events; news and comedy; exclusive talk and entertainment; and the most comprehensive lineup of Latin commercial-free music, sports, and talk programming in radio. SiriusXM content is available via satellite and through the SiriusXM Internet Radio app for smartphones and other connected devices, as well as online at siriusxm.com. Sirius XM Holdings Inc., formerly known as Sirius XM Radio Inc., is headquartered in New York.

It was big news this morning for fans across the US as radio legend and "King of All Media" Howard Stern announced during his morning program on SiriusXM that he had reached a deal that would keep his morning show live on-the-air for the next five years.

Under the new long-term agreement, The Howard Stern Show will continue to be broadcast live exclusively on SiriusXM's Howard 100 channel, 7:00 am to 11:00 am ET, with replays throughout the day, and On Demand online and through the SiriusXM app. Additionally, Stern will continue to produce his Howard 101 channel, which includes current and classic episodes of The Howard Stern Show as well as original special programming throughout the day.

In addition to the live shows, the deal includes content access for an additional seven years, meaning that Stern will be heard exclusively on Sirius XM for a total of 12 years. In addition, the deal includes a video component which will include video of The Howard Stern Show as well as the Howard Stern archives and special programming.

Stern agent Don Buchwald, a legendary deal maker, pushed the negotiations hard and today's announcement came just one day before what was to be Stern's last show for the satellite radio company. Buchwald noted that "the terms and conditions of a deal of this nature required a lot of give and take, as well as creative thinking on everyone's part. Howard and I are excited to enter into this cutting edge and truly unique broadcasting agreement with SiriusXM that I believe will further the legacy of Howard Stern."

"This is a unique and pioneering agreement, which includes SiriusXM licensing the Howard Stern archives in both audio and video through 2027," said Jim Meyer, SiriusXM's Chief Executive Officer. "We look forward to working with Howard to offer the Howard Stern experience through new platforms. In 2006, when Howard launched his two uncensored satellite radio channels – Howard 100 and Howard 101 – he transformed how people listen to radio. We are thrilled that Howard is staying and expanding his relationship with SiriusXM to include video."

This deal locks in a key to any potential future success for Sirius XM. Stern's star power and draw is critical for the company's subscriber numbers. It is hard to see how they would prosper without him--even with the recent sales boom for US auto manufacturers. Stern has been the "killer app" for the company, with many subscribers using the service largely for access to his show and channels full of Stern-world content. Today's announcement may boost subscriber numbers and renewals, as those who were on the fence waiting to see whether Stern would stay or go now have their answer.

Stern's presence on the radio for Sirius XM has coincided with massive growth for the company. When he first left terrestrial channels in 2004--hounded by the FCC and self-proclaimed morality police within the US--the company had just 600,000 users. Today, following the merger with rival XM, the combined company has a subscriber base of 20 million. Revenues and profits have seen similar growth, with the company now expecting a profit of more than $500 million versus losses of $712 million in 2004.

Stern has grown as well in that time, transforming from "the nation's most notorious shock jock" according to some into a multi-platform media star via his role as both a leader on radio and a judge on "America's Got Talent." Stern has also garnered numerous accolades for his skills as an interviewer, with many finding his discussions with leading celebrities, politicians, musicians, etc. to be among the most insightful and thought-provoking of any produced today. In fact, had Stern left Sirius, many thought his next move might be as the host of a Barbara Walters-style interview program--although Stern himself has often voiced a desire to host a TV game show.

Clearly, Stern has come a long way from his origins on FM radio and the details of this deal--both monetary and temporal--indicate that SiriusXM recognizes his worth and his critical role in the company's future.

The stock had a bit of a pop this morning, and we would expect some more gains as the news is digested. However, our models remain neutral on the stock--as they have been for much of the past few years. ValuEngine continues its HOLD recommendation on SIRIUS XM HLDGS for 2015-12-14. Based on the information we have gathered and our resulting research, we feel that SIRIUS XM HLDGS has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE Company Size but UNATTRACTIVE Book Market Ratio.

You can download a free copy of detailed report on SIRI from the link below.

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	4.00	0.03%
3-Month	3.98	-0.44%
6-Month	4.01	0.24%
1-Year	4.02	0.39%
2-Year	4.16	3.91%
3-Year	3.81	-4.74%

Valuation & Rankings
Valuation	5.57% undervalued	Valuation Rank(?)	50
1-M Forecast Return	0.03%	1-M Forecast Return Rank	53
12-M Return	19.76%	Momentum Rank(?)	84
Sharpe Ratio	0.77	Sharpe Ratio Rank(?)	91
5-Y Avg Annual Return	21.97%	5-Y Avg Annual Rtn Rank	92
Volatility	28.53%	Volatility Rank(?)	59
Expected EPS Growth	42.42%	EPS Growth Rank(?)	74
Market Cap (billions)	21.98	Size Rank	95
Trailing P/E Ratio	36.36	Trailing P/E Rank(?)	39
Forward P/E Ratio	25.53	Forward P/E Ratio Rank	17
PEG Ratio	0.86	PEG Ratio Rank	47
Price/Sales	4.92	Price/Sales Rank(?)	17
Market/Book	360.82	Market/Book Rank(?)	1
Beta	1.57	Beta Rank	18
Alpha	0.11	Alpha Rank	78

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