Why Sirius XM Holdings Inc. Shares Will Soar to $4

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Sirius XM Holdings gained slightly on Wednesday after Barclays upgraded the satellite radio company from equalweight to overweight.

So what: Along with the upgrade, analyst Kannan Venkateshwar reiterated his price target of $4, representing about 25% worth of upside to yesterday's close. While momentum traders might be turned off by Sirius' sharp pullback during the past six months, Venkateshwar's call could reflect a growing sense on Wall Street that the concerns surrounding its subscriber growth are becoming overblown.


Now what: Barclays thinks that Sirius will eventually be valued as a capital return play versus a growth play. Venkateshwar said:

Despite the slowdown in subscriber growth, we forecast FCF to grow at ~18% on an absolute basis and ~26% on a per share basis (2013-2016 CAGR), driven largely by the company's operating leverage. This is one of the highest growth profiles across other content or distribution companies, most of which are focused on capital returns. In our opinion, this sets up SIRI to buy back at least 10% of its outstanding shares annually for the next few years.

When you couple that upbeat outlook with Sirius' still-beaten down stock price, it's tough to disagree with Barclays' bullishness. 

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The article Why Sirius XM Holdings Inc. Shares Will Soar to $4 originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of Sirius XM Radio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Kevin

SiriusXM was supposed to be the 'Medium of the Future' and for a time it was. Now however, it seems like the programmers have gone out of their way to make SIRI sound just like FM or dare I say, AM radio.

Talking heads rattling on over the music, insufferable channel promos repeated ad nauseum and I don't care how much you love an artist; a channel devoted to any single artist will cure you of that love affair.

At one point, I had 7 different radios at home and at work for myself and my family. I now have 1 in my car and I'm on the fence about renewing that one.

Lose the talking heads, lose the stupid promos, lose the single artist channels or lose another subscriber.

March 28 2014 at 8:55 AM Report abuse rate up rate down Reply