XM, Sirius Shares Fall After Goldman Price Target Cut
June 20, 2008 at 5:19 AM (PT)
XM SATELLITE and SIRIUS SATELLITE RADIO shares tumbled on THURSDAY after GOLDMAN SACHS slashed its price target on the two companies, who hope their proposed merger will soon pass its last regulatory hurdle, reports REUTERS. XM shares fell $1.84, or about 17.7%, to $8.54, and SIRIUS stock fell 33 cents, or about 13.5%, to $2.11 in active morning NASDAQ trading.
GOLDMAN SACHS cut its six-month targets on SIRIUS to $1.75 from $2.25, and reduced its price target on XM TO $6.50 from $11.50. GOLDMAN kept its "sell" rating on XM and "conviction sell" rating on SIRIUS.
The new outlook comes in the wake of news that FCC Chairman KEVIN MARTIN supports the companies' merger plan, leading some to think that the deal's completion may come within weeks.
"While the FCC draft circulation signaling the merger's likely ultimate conditioned approval generated a short-term lift to the stocks, we think any 'imminent merger' related strength has passed," GOLDMAN said. In addition, GOLDMAN said that the companies declining cash flow is "insufficient to justify valuations even giving credit for merger synergies."
"With core demand for satellite radio falling amongst the younger demographics, versus rapid increases for MP3 players and other new technologies ... we see long-term risk to the outlook," the note said.
Follow XM's stock price here.
Follow SIRIUS' stock price here.