Sirius To See More 2005 Catalysts Than XM Satellite

Merrill Lynch reinstated coverage on Sirius Satellite Radio (nasdaq: SIRI - news - people ) at "buy" and a $7.50 price objective, based on a discounted cash-flow analysis. Merrill said Sirius should have more 2005 news catalysts than rival XM Satellite Radio (nasdaq: XMSR - news - people ). The research firm said Sirius shares should benefit from a pickup in the auto manufacturer rollout with Ford Motor (nyse: F - news - people ) and DaimlerChrysler (nyse: DCX - news - people ) unit Chrysler, "new third-generation retail products, Howard Stern subscribers, and a focus on building advertiser relationships." Merrill said Chief Executive Mel Karmazin "brings decades of media experience and a reputation for strict cost discipline, which should help Sirius to develop content/advertising/distribution relationships as content becomes a larger catalyst than distribution." The firm said "the market is not giving Sirius the benefit for ultimately achieving 50% market share with similar or better operating leverage (less than 25% revenue share) than XM Satellite." Merrill said XM Satellite shares are fairly valued at current levels "while there is nearly 30% upside potential for Sirius shares." Merrill expects Sirius to show 2.4 million subscribers in 2005 with a $337 million free cash flow loss, but said the company should be free cash flow positive in 2007.