More Lovin' for Sirius XM

Once again we're seeing analysts line up on the bullish side of Sirius XM Radio (Nasdaq: SIRI  ) ahead of what should be another strong quarterly report.

Morgan Stanley upgraded shares of the satellite radio giant to "overweight" this morning, setting a $2 price target. Does anyone remember when at least one analyst checked in with a $0.25 target?

It's comical now, but Goldman Sachs analyst Mark Wienkes was initially spot-on with his pessimistic call in October 2008. A few months later, shares of Sirius XM would bottom out at a  mere nickel. However, that same disastrous moment also proved to be one of the market's best buying opportunities of 2009. Sirius XM was able to hold off bankruptcy, turn the profitability corner, and re-emerge as a growth stock.

You don't see too many analysts targeting pocket change pricing for the satellite radio star these days. Sure, there's always the occasional bearish financial writer laying down a quarter on the pinball machine, but it's a game no one else is playing.

Sirius XM will report fourth-quarter financials in two weeks, and investors are already banking on another profitable quarter of sequential subscriber growth. There haven't been any indications to think otherwise. General Motors' (NYSE: GM  ) successful IPO is proof that automakers are revving up again, and factory-installed receivers are the primary source of subscriber growth for Sirius XM.

Morgan Stanley's bullish upgrade this morning leans on expectations for accelerating free cash flow. Again, that shouldn't be a problem. Sirius XM has been keeping content costs in check in this scalable model where every incremental subscriber is more valuable than the one before it.

There's also hope for growth on the streaming front. This hasn't been a big draw in the past, but Howard Stern's new five-year deal kicked in last month with the inclusion of streaming through Android, iPhone, and Research In Motion (Nasdaq: RIMM  ) BlackBerry devices. It may still be a hard sell for stand-alone streaming accounts, but it's just a $3 add-on for subscribers on receiver-based plans.

Sirius XM isn't the cheapest stock in town. Morgan Stanley's $2 target implies a market cap of nearly $13 billion and a debt-adjusted enterprise value closing in on $16 billion. These levels create lofty valuation multiples relative to satellite television behemoths DirecTV (NYSE: DTV  ) and DISH Network (Nasdaq: DISH  ) . Then again, the satellite radio industry is growing at a time when the cable and satellite television providers in general are living in fear of the growing ranks of so-called cord cutters.

Satellite radio is growing with every passing quarter. A week from next Tuesday it'll grow a little more.

What are your expectations for Sirius XM's fourth quarter? Share your thoughts in the comment box below.

General Motors is a Motley Fool Inside Value recommendation. 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.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 02, 2011, at 8:14 PM, draland wrote:

    We , the " fanatic " retail investors, have been saying This ALL ALONG, duh!!!

    Good Luck Chasing ; & God help the shorters ....

    BTW : Brandon Matthews cud help Alot of U guys that need help w this Hated Equity........

    Me...... Been long & Strong Siri since before the merger...Peace Out .........

    THE DOC

  • Report this Comment On February 02, 2011, at 8:18 PM, NewSiriFan wrote:

    Sure, loved seeing the stock pop today. I bet it caught a lot of shorts off guard when they moved up the earnings release date.

  • Report this Comment On February 03, 2011, at 1:27 AM, ItAintCool wrote:

    I agree with draland, Brandon Matthews at SatwavesPro has been the only one who truly understands what this stock has been through and where it's going.

    Everybody else is either Monday morning quarterbacking or completely wrong.

  • Report this Comment On February 03, 2011, at 1:49 AM, diver92 wrote:

    Long-Long Sirius

  • Report this Comment On February 03, 2011, at 7:34 AM, draland wrote:

    Well said 'itAintCool'........its been and remains a long concerted campaign to to deceive and devalue this equity, principally because it threatens the mainstream media and secondly, because it is majority owned by US, the retail investors................

  • Report this Comment On February 03, 2011, at 7:37 AM, draland wrote:

    Hey Jim Cramer ??

    Sell Sell Sell !!!!

  • Report this Comment On February 03, 2011, at 10:00 AM, MizzouFanVan wrote:

    Where is plange01 and SIRIdoom this week? Guys? I hope you haven't been shorting this stock recently. :)

  • Report this Comment On February 03, 2011, at 12:19 PM, ItAintCool wrote:

    I'm sure SIRIdoom and plange01 are doing like many short sellers right now, busy crying in their bedrooms, thinking why didn't they cover their short positions sooner? Better yet, crying about why didn't they go long on SIRI!

  • Report this Comment On February 03, 2011, at 6:21 PM, jm31563 wrote:

    I have felt very stongly about SIRI since I began investing in it last year. I came in a 1.36 in 2010 and have bought more shares, now owning 1k so far. I just got 2 words for all the naysayers's articles and comments I've been reading over the past year:

    LONG SIRI

  • Report this Comment On February 03, 2011, at 9:56 PM, draland wrote:

    Hey Jim Cramer ??

    Sell Sell Sell !!!!

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