Financial Analysis Case Assignment 2: Urgent

40 32 24

16 12 10 8 6

4

Percent shares traded

60 40 20

Target Price Range 2020 2021 2022

SIRIUS XM HOLDINGS NDQ-SIRI 5.72 24.9 35.845.0 1.23 0.7% TIMELINESS 2 Raised 6/9/17 SAFETY 4 Lowered 2/5/16 TECHNICAL 2 Lowered 10/27/17 BETA 1.05 (1.00 = Market)

2020-22 PROJECTIONS Ann’l Total

Price Gain Return High 20 (+250%) 37% Low 12 (+110%) 21% Insider Decisions

D J F M A M J J A to Buy 0 0 0 0 0 0 0 0 0 Options 0 0 0 0 0 0 0 0 0 to Sell 0 0 0 0 0 0 0 0 0 Institutional Decisions

4Q2016 1Q2017 2Q2017 to Buy 163 203 210 to Sell 218 199 201 Hld’s(000)108778711359291030546

High: 6.8 4.3 3.9 0.8 1.7 2.4 3.0 4.2 3.9 4.2 4.6 5.9 Low: 3.5 2.7 0.1 0.1 0.6 1.3 1.8 2.9 3.0 3.3 3.3 4.4

% TOT. RETURN 9/17 THIS VL ARITH.*

STOCK INDEX 1 yr. 33.5 16.4 3 yr. 59.5 31.5 5 yr. 118.6 88.9

CAPITAL STRUCTURE as of 9/30/17 Total Debt $6732.5 mill. Due in 5 Yrs $1500 mill. LT Debt $6728.3 mill. LT Interest $175.0 mill. (Tot. Interest Covered: 4.3x)

(118% of Total Cap’l) Leases, Uncapitalized Annual rentals $41.4 mill.

No Defined Benefit Pension Plan

Pfd Stock None Common Stock 4,595,820,002 shares as of 10/23/17

MARKET CAP: $26.3 billion (Large Cap) CURRENT POSITION 2015 2016 9/30/17

($MILL.) Cash Assets 111.8 213.9 73.6 Receivables 234.8 223.0 225.0 Inventory (FIFO) 22.3 20.4 22.5 Other 193.0 185.4 175.5 Current Assets 561.9 642.7 496.6 Accts Payable 625.3 713.0 736.8 Debt Due 4.8 5.5 4.2 Other 1866.4 1950.1 1941.8 Current Liab. 2496.5 2668.6 2682.8

ANNUAL RATES Past Past Est’d ’14-’16 of change (per sh) 10 Yrs. 5 Yrs. to ’20-’22 Revenues 15.0% 4.5% 8.5% ‘‘Cash Flow’’ - - 8.5% 22.0% Earnings - - - - 29.5% Dividends - - - - Nil Book Value - - - - NMF

Cal- Full endar Year

QUARTERLY REVENUES ($ mill.) Mar.31 Jun.30 Sep.30 Dec.31

2014 997.7 1035.3 1057.1 1091.0 4181.1 2015 1081.0 1123.2 1169.7 1196.2 4570.1 2016 1201.0 1235.6 1277.6 1303.0 5017.2 2017 1294.1 1347.6 1379.6 1378.7 5400 2018 1375 1425 1400 1450 5650 Cal- Full

endar Year EARNINGS PER SHARE A

Mar.31 Jun.30 Sep.30 Dec.31 2014 .02 .02 .02 .03 .08 2015 .02 .02 .02 .03 .09 2016 .03 .04 .04 .04 .15 2017 .04 .04 .06 .06 .20 2018 .07 .07 .08 .08 .30 Cal- Full

endar Year QUARTERLY DIIVIDENDS PAID D

Mar.31 Jun.30 Sep.30 Dec.31 2013 - - - - - - - - - - 2014 - - - - - - - - - - 2015 - - - - - - - - - - 2016 - - - - - - .01 .01 2017 .01 .01 .01 .011

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 - - .01 .01 .05 .18 .44 .63 .46 .64 .72 .80 .65 .62 .74

d4.04 d4.28 d.34 d.48 d.56 d.70 d.31 d.09 .04 .11 .19 .14 .10 .13 d5.40 d6.02 d.69 d.57 d.65 d.79 d.39 d.25 d.10 .03 .07 .07 .06 .08

- - - - - - - - - - - - - - - - - - - - - - - - - - - - 1.42 .54 .02 .02 .04 .07 .04 .04 .06 .08 .04 .02 .03 .02 5.62 .47 1.16 .78 .24 d.27 d.54 d.01 - - .05 .19 .77 .45 .23

57.46 77.45 1137.8 1276.9 1346.2 1434.6 1471.1 3651.7 3882.7 3933.2 3753.2 5262.4 6096.2 5638.7 - - - - - - - - - - - - - - - - - - 35.9 26.4 33.4 58.0 42.9 - - - - - - - - - - - - - - - - - - 2.28 1.66 2.13 3.26 2.26 - - - - - - - - - - - - - - - - - - - - - - - - - - - -

922.1 1664.0 2472.6 2817.0 3014.5 3402.0 3799.1 4181.1 NMF NMF 23.1% 26.2% 31.3% 33.5% 42.6% 45.0%

106.8 203.8 309.5 273.7 267.9 266.3 253.3 266.4 d565.3 d547.1 d170.1 163.2 427.0 470.9 377.2 493.2

- - - - - - 2.8% 3.2% .8% 40.8% 40.6% NMF NMF NMF 5.8% 14.2% 13.8% 9.9% 11.8%

d395.0 d1614 d1217 d1358 d970.6 d486.4 d1320 d764.0 1278.6 2851.7 3062.7 3021.8 3012.4 2431.0 3093.8 4493.9 d792.7 8.5 37.4 207.6 704.1 4039.6 2745.7 1309.8

NMF NMF NMF 9.6% 15.6% 8.0% 8.2% 10.8% - - NMF NMF 78.6% 60.6% 11.7% 13.7% 37.7% - - - - - - 78.6% 60.6% 11.7% 13.7% 37.7% - - - - - - - - - - - - - - - -

2015 2016 2017 2018 © VALUE LINE PUB. LLC 20-22 .89 1.06 1.20 1.25 Revenues per sh 1.45 .15 .21 .25 .35 ‘‘Cash Flow’’ per sh .55 .09 .15 .20 .30 Earnings per sh A .50 - - .01 .04 .04 Div’ds Decl’d per sh D .05

.03 .04 .05 .05 Cap’l Spending per sh .05 d.03 d.17 d.15 d.05 Book Value per sh B 1.10

5147.6 4740.9 4550.0 4525.0 Common Shs Outst’g C 4500.0 43.0 27.0 Bold figures are

Value Line estimates

Avg Ann’l P/E Ratio 32.0 2.17 1.42 Relative P/E Ratio 2.00

- - .2% Avg Ann’l Div’d Yield .4%

4570.1 5017.2 5400 5650 Revenues ($mill) 6500 31.7% 33.9% 35.0% 38.0% Operating Margin 50.0% 272.2 269.0 275 285 Depreciation ($mill) 325 509.7 745.9 950 1400 Net Profit ($mill) 2250

42.9% 31.7% 40.0% 40.0% Income Tax Rate 35.0% 11.2% 14.9% 17.6% 24.8% Net Profit Margin 29.5% d1935 d2026 d2720 d2550 Working Cap’l ($mill) d850 5443.6 5842.8 6000 6000 Long-Term Debt ($mill) 6000 d166.5 d792.0 d640 d230 Shr. Equity ($mill) 2500 12.5% 18.0% 13.0% 16.5% Return on Total Cap’l 26.5% 37.7% - - NMF NMF Return on Shr. Equity 90.0% 37.7% - - NMF NMF Retained to Com Eq 81.0%

- - 6% 20% 13% All Div’ds to Net Prof 10%

Company’s Financial Strength C++ Stock’s Price Stability 75 Price Growth Persistence 90 Earnings Predictability 65

(A) Fully diluted earnings. Excludes non- recurring gains/(losses): ’15, $0.01, ’12, $0.44; ’10, ($0.02); ’09, ($0.05); ’08, ($2.20); ’05, ($0.03). Next earnings report due early Feb.

(B) Includes intangibles. In 2016, $5.8 billion, or $1.22 per share. (C) In millions. (D) Excl. special dividend of $0.05, paid

12/28/12. Instituted quarterly dividend on 11/1/16.

BUSINESS: Sirius XM Holdings, Inc. broadcasts a wide variety of programming (music, sports, talk, news, comedy, etc.) in the U.S. on a subscription fee basis through two proprietary satellite radio systems. As of 12/31/16, it had more than 31.3 million subscribers. Subscribers can also receive channels or features like SiriusXM On Demand and MySXM online and through mobile applications. Sirius

satellite radios are primarily distributed through automakers, retail locations, and its Web site. Has 2,323 employees. Officers/directors own 1.06% of common; Liberty Media Corp., 67.21% (4/17 proxy). Inc.: DE. Chair: Gregory B. Maffei. CEO: James E. Meyer. Addr.: 1290 Avenue of the Americas, 11th Floor New York, NY 10104. Tel.: 212-584-5100. Internet: www.siriusxm.com.

Sirius XM continued to gain steam during the third quarter. Indeed, share earnings were up 50%, on an 8% revenue advance. Even though the company faced a somewhat difficult operating backdrop, due to sluggish auto sales and the impact of severe weather in parts of the country, Sirius was able to grow subscribership. Too, advertising revenues increased 21% during the recent period. The company is well positioned for near-term growth. Sirius’ recent invest- ment in Pandora (see below), focus on orig- inal programming, and ongoing technologi- cal enhancements should support results. In addition, self-pay subscribers will likely grow about 5%, to 27 million, this year, ex- tending the gains from its auto paid promotional accounts. In all, we think share net will climb 30%-35% for the full year, while revenues increase about 8%. Likewise, we look for the top and bottom lines to advance another 5% and 50%, respectively in 2018. Sirius is trying to widen its audiences. The company purchased a minority stake in Pandora for $480 million earlier this year. And in October, it signed a multi-

year broadcasting agreement with For- mula 1, for coverage of the Grand Prix. We think these strategic partnerships will augur well for long-term gains. Plus, Sirius may eye other tuck-in acquisitions or joint ventures to complement its hold- ings. Meanwhile, management has earmarked $2 billion for returning capital to stockholders, as well as for other stra- tegic investments. The company has been rewarding its shareholders. The board of directors an- nounced plans to hike the quarterly pay- ment 10%. Even though this increases the distribution by less than a penny per share, we think it is a step in the right direction. Meanwhile, Sirius will likely continue to reduce its stock base. During the latest quarter, the company repur- chased $211 million worth of its shares. These shares are favorably ranked for the year ahead. What’s more, this issue has plenty of room to grow over the next 3 to 5 years. That said, rumors regarding potential tie-ups in this industry could move these shares, adding some additional volatility in the near term. Orly Seidman November 3, 2017

LEGENDS 25.0 x ″Cash Flow″ p sh

. . . . Relative Price Strength Options: Yes Shaded area indicates recession

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