Sirius XM Radio (SIRI) has enough bad news to deal with: A souring consumer economy; the decline of the U.S. car industry, where Sirius gets many of its new subscribers; and growing competition. Some new concerns for Mel Karmazin and company: “The viability of the current business model” set against about $1 billion of debt maturities “and an uncertain amount of cash on hand,” Goldman’s Mark Wienkes notes today.
“Specifically, we believe the current business model will have an increasingly difficult path as the cost of churn [subscribers fleeing the service] impairs the ability to generate free cash requisite to satisfy debt maturities or ultimately accrue any meaningful value to shareholders,” he says.
As a result, Wienkes is cutting his growth targets for Sirius XM. He now thinks they’ll sign up 644,000 net new subscribers this quarter, down 11% from his previous estimate of 724,000; 1.6 million next year, down 20% from his previous estimate of 2.0 million; and 1.4 million in 2010, down 26% from his previous estimate of 1.9 million.
Wienkes rates SIRI “conviction sell” and thinks the stock should trade for 25 cents. It’s down 10% today to 34 cents.