On Wednesday, Deutsche Bank revised its price target for Sirius XM Radio (NASDAQ:SIRI) shares, decreasing it to $3.75 from the previous $5.00, while keeping a Hold rating on the stock. The adjustment comes as the bank sets a more conservative valuation outlook for the satellite radio company, citing uncertainties in the company's future growth.
The bank's analyst pointed to revised lower estimates for Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Free Cash Flow (FCF) as primary reasons for the price target reduction. The analyst emphasized that the new valuation reflects the challenges in foreseeing a return to sustained positive subscriber and EBITDA growth for Sirius XM.
Currently, Deutsche Bank is not projecting growth in Sirius XM's subscriber numbers or in its consolidated EBITDA for the upcoming six-year period. This projection is based on a valuation perspective that suggests Sirius XM's stock should trade at an Unlevered Free Cash Flow (UFCF) yield that aligns with the company's Weighted Average Cost of Capital (WACC) of approximately 8%, as estimated by Deutsche Bank.
The lowered price target indicates a more cautious stance on the stock's potential performance, given the lack of visibility into key growth metrics. Sirius XM's stock performance and future financial results will be closely watched by investors as the company navigates the challenges outlined by Deutsche Bank.
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