It's been a rough few weeks for Sirius XM Radio (NASDAQ:SIRI) shareholders, but at least one Wall Street analyst sees the recent weakness as a buying opportunity.
Evercore is upgrading shares of the satellite radio provider this morning from equal weight to overweight. Sirius XM's steady growth in premium audio and the potential to build on that model as it ramps up its telematics operations after acquiring Agero's connected vehicles business last year are encouraging. Evercore is also taking advantage of the more compelling valuation given the pullback in recent weeks, but that still isn't stopping it from pushing its price target up from $3.90 to $4.50.
This morning's analyst move couldn't have come at a better time for Sirius XM. The stock had fallen out of favor in recent weeks. It closed lower for three consecutive weeks before closing flat last week. It was trading lower through yesterday's close for this week, positioning the shares for its fifth consecutive week free of gains. Given Sirius XM's historic volatility, that kind of losing streak is rare. The satellite radio monopoly never stands still, and its huge overall gain since bottoming out five years ago points to a chart that has trended higher -- not lower -- over stretches of time.
This will be an interesting month for Sirius XM. As promised a few months ago, subscription rates did inch higher earlier this week. The basic monthly plan is now $14.99, up from the $14.49 standard price that had been in place since the start of 2012. There will naturally be a lot of attention on how well subscriber tallies hold up for this new quarter in that environment, but listeners didn't flinch during the larger increase two years ago.
Sirius XM is in a good place. New auto sales are booming, and more used cars are being sold with existing satellite radio receivers already in place. Monthly churn has also clocked in at 1.8% in recent quarters, indicating that retention remains strong.
We'll see if the Evercore upgrade is enough to shake the stock from a rare four-week slump, but the long-term prospects for Sirius XM radio remain bright as 2014 and beyond play out.
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Longtime Fool contributor Rick Munarriz 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.