NEW YORK (Reuters) - 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.
XM shares fell $1.84, or about 17.7 percent, to $8.54, and Sirius stock fell 33 cents, or about 13.5 percent, 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 U.S. Federal Communications Commission chief 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.
(Reporting by Franklin Paul, editing by Maureen Bavdek)
No comments:
Post a Comment