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This Week in Sirius XM Radio

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Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  ) moved lower this week, closing 3% lower to hit $3.11. The general market moved higher, so Sirius XM was bucking the positive trend.

  • There was more going on beyond the share-price gyrations, though:
  • Sirius XM's CFO raised some interesting points at an investor conference.
  • Lazard Capital Markets boosted its target on the satellite-radio star.
  • Sirius XM is activating dormant receivers to give non-subscribers a taste of March Madness.
  • Spotify also hit a major premium milestone, and it's tweaking its model to challenge Pandora (NYSE: P  ) .

Let's take a closer look.

Don't Frear the reaping
CFO David Frear was a presenter at this week's Piper Jaffray Technology, Media, and Telecommunications Conference. He offered up some upbeat insight into the media giant's business, occasionally debunking conventional wisdom.

For starters, he said buyers of used cars with Sirius XM receivers convert at the same rate as new-car buyers. That's surprising, since one could have easily assumed that drivers turning to secondhand cars in a move to milk more value out of their purchasing dollars would seem less likely to be able to afford satellite radio.

One can always argue that older cars don't have the same kind of high-tech toys that new cars do that make it easy to stream online radio in lieu of premium radio, but Frear had an even bigger surprise there. The conversion rate for Sirius XM has clocked in higher in cars with Bluetooth dashboard integration for seamless online streaming.

Frear was surprised at the data himself, concluding that car buyers seeking out connected cars are early adopters who are already consuming audio across different options. In other words, they'll stream Pandora, but they still crave their Howard Stern.

Wall Street love
Lazard Capital Markets doesn't stand still in assessing Sirius XM. The analyst firm lowered its price target on the shares from $2.90 to $2.70 this past summer, only to eventually move up from $3.25 to $3.50 a few months later.

Lazard's new price target is $4. A note on Forbes indicates that the boost is tied to expectations that the company will convert some of its debt to equity. Such a move would be dilutive to a company with more than 6.6 billion shares fully diluted outstanding, but cleaning up its balance sheet would lower its interest expense exposure, which clocked in at $265.3 million last year alone.

Jumping through hoops
Sirius XM is making an interesting March Madness wager, activating dormant receivers from March 19 to March 24 for access to every game during those first six days of the NCAA men's basketball championship.

Hoops fans know that March Madness continues well beyond March 24, so the hope here is that basketball fans that aren't subscribers will pay up to continue receiving the service through the Final Four in early April. Since a little more than half of the 50 million cars out there with satellite receivers are inactive, this move that opens up the service to a large audience with little effort on its end.

Sure, one can argue that terrestrial radio also offers thorough March Madness coverage. But you still can't blame Sirius XM for tyring.

Premium streaming
Pandora has found it a challenge to get its 67.7 million active listeners to pay up for the leading music streaming service, but Spotify isn't having a problem getting people to crack open their pocketbooks. Spotify revealed this week that 6 million of its 24 million users are now premium accounts, paying $4.99 a month for ad-free PC streaming or $9.99 a month for access across mobile and all other devices.

Pandora must be jealous, while Sirius XM should be encouraged by the appetite for premium streaming. Pandora did post strong quarterly results earlier this month, but just 13% of its revenue is coming from subscriptions.

In the meantime, Pandora's CEO stepped down earlier this month, and a name that keeps coming up for a possible replacement is none other than former Sirius XM chief Mel Karmazin. That would be an interesting choice, though it's hard to fathom that Pandora would be able to afford him.

Beyond this week
Even though Sirius XM is one of the market's biggest winners since bottoming out three years ago, there's still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in The Motley Fool's brand-new premium report. To get started, just click here now.

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Related Tickers

9/27/2016 4:00 PM
SIRI $4.16 Down -0.01 -0.12%
Sirius XM Radio CAPS Rating: **
P $14.14 Up +0.15 +1.07%
Pandora Media CAPS Rating: **