SiriusXM Impresses as Liberty Media Hits Second-Quarter Estimates

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Liberty Media mogul John Malone

The conglomerate is building a new stadium for the Atlanta Braves.

Second-quarter results for most of Liberty Media's component ventures, which include stakes in SiriusXM, Live Nation Entertainment and the Atlanta Braves, came out last week and fell in line with expectations, but the conglomerate as a whole is continuing to impress Wall Street.

Quarterly revenues for SiriusXM hit a record high of $1.23 billion, climbing more than 10 percent year-over-year. Net income grew 68 percent to $173 million from $102 million in 2015. Wall Street had been anticipating the pickup since the first quarter, when Sirius increased its guidance.

Investors are picking up on the fact that SiriusXM's market cap is running at about a 13 percent discount to its net asset value, which portends a solid bump in the stock price down the line, especially if those assets get sold. If Liberty chairman John C. Malone, who is widely regarded as one of the architects of the modern cable business, decides to merge any of his entities, those returns will be felt throughout his family of companies.

Malone and CEO Greg Maffei are expected to buy back 25 percent of outstanding shares this year, as they have in the previous years, basically taking the company private on an incremental basis. Such moves are often said to "maximize shareholder value," a term that has been criticized as a euphemism for paring down companies for the sake of short-term profits.

"We prefer shares repurchases because it's not a forced allocation of capital," Maffei said on the second-quarter conference call with investors. "We certainly start out with a predilection against dividends."

The fundamentals of SiriusXM appear to be healthy. Eighty-eight million cars leave dealerships every year with the satellite radio service built in, and 40 percent of those installations turn into paying customers. That's a rate that one analyst called "nice and sticky."

Liberty Media CEO Greg Maffei recently floated a $15-a-share offer for Pandora, the internet radio service, valuing the company at more than $3 billion, but the deal didn't go through. Maffei said on the call that he "didn't know how [he] could be more negative on streaming services."

Liberty has a 27 percent stake in cable provider Charter Communications. Charter's earnings come out next week.

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