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Things never get dull for the country's lone satellite-radio provider. Even though shares of Sirius XM Radio (NASDAQ: SIRI ) didn't hit a new four-year high again this week -- with the stock closing marginally lower at $3.15, off $0.01 during the short trading week -- that doesn't mean it was a ho-hum week for the media giant.
The market digested a board shakeup as the week began. Sirius XM then alerted subscribers that music royalty fees will increase come February. Citigroup also raised its price target on the shares.
Let's take a closer look.
Sirius XM has become more interesting than usual since Liberty Media (NASDAQ: LMCA ) finally gained regulatory clearance to take majority control. It has converted its preferred-share stake and now has the keys to drive the satellite-radio speedster.
Taking control of the wheel has its advantages, and one of those benefits came when three old-time Sirius XM board members resigned this week, just ahead of the holiday weekend. Liberty Media wasted no time in replacing them with its own executives.
An SEC filing on Tuesday details the new board members.
- Mark Carleton has served as senior vice president of Liberty Media since May 2007.
- Robin Pringle is Liberty Media's head of corporate development. At 34, she's also now the youngest member on the Sirius XM board.
- Charles Tanabe served as an executive vice president and the general counsel of Liberty Media until last month.
James Meyer, Sirius XM's interim CEO, has also been named to the board.
And for those scoring at home, Liberty Media is back to its four-letter ticker symbol now that the Starz (NASDAQ: STRZA ) spinoff has been completed. Liberty Media was trading as LMCAD earlier this month.
The Starz spinoff is relevant to Sirius XM. Now that Liberty Media has spun off the premium video platform, Sirius XM is an even bigger part of the remaining Liberty Media conglomerate. It's probably also worth noting that Tanabe is also on the Starz board.
A few more coins for the jukebox
After seeing Sirius XM close out 2012 with 2 million net new subscribers despite a 12% rate increase when the year began, one can argue that the media titan has some pricing elasticity that it can play with.
Well, Sirius XM is testing out that argument now. The company is informing members that the monthly music royalty fee will go from $1.42 to $1.81 for its most popular Select and Premier pricing plans. That's a significant 27% increase, though it's smaller in terms of actual money than last January's basic monthly rate bump from $12.95 to $14.49.
It will be interesting to see how the current quarter plays out, as many subscribers may be taken by surprise when their February bills show up slightly higher.
The smart money has to say the move won't matter. Sirius XM didn't skip a beat during last year's increase. However, investors should know soon how this plays out. If there's any weakness, it will probably show up right away in the company's first-quarter financials.
It could be worse, of course. Try Pandora (NYSE: P ) on for size. The streaming-audio giant is finding it difficult to cope with escalating music royalties because most of its users aren't paying subscribers. It can't pass on the costs beyond either adding more audio ads or getting its sponsors to pay more.
Sirius XM is in a good place, even if the timing could be better for a bill increase.
Fool for the Citi
Analysts are generally upbeat about Sirius XM, with 12 of the 17 major analysts following the stock rating it as either a buy or a strong buy.
Pull up a Sirius XM chart for the past four years to see how bullishness has been the right call. As the share price increases, analysts who are already bullish often respond by simply jacking up their price targets, and that's exactly what Citigroup did this week. Bumping its price target from $3 to $3.60 may be credited to improving EBITDA and share repurchase assumptions, but at the end of the day, Citi simply finds it hard to justify a bullish rating with a $3 goal for the stock when the shares are already at $3.15.
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