This Week in Sirius XM Radio

It was a busy week for Sirius XM in the satellite radio realm.

Jan 4, 2014 at 9:45AM

Things never get dull for the country's lone satellite radio provider. Shares of Sirius XM Radio (NASDAQ:SIRI) moved higher after three straight weeks of declines were followed by a flat one, climbing 1.4% to close at $3.57. The media darling's slight gain was fueled largely by an Evercore analyst upgrade on Friday. The analyst is boosting his price target to $4.50. 

There was more going on beyond the share-price gyrations, though. Liberty Media (NASDAQ:LMCA) waited until the week was over to announce that it will make Sirius XM a subsidiary. Sirius XM came under fire on reports that Google (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) are making a bigger push for the automotive dashboard market. The service's basic monthly rate increased to $14.99 a month. And on the streaming front, Pandora (NYSE:P) received a bullish analyst note. 

Let's take a closer look.

Liberty and justice for all
It's now been a year since Liberty Media assumed a controlling stake in Sirius XM, and it finally tipped its hand. Instead of cashing out at a huge profit or spinning off its stake to its own investors, Liberty's move is make it a wholly owned subsidiary by exchanging every Sirius XM share for 0.076 shares of a Liberty Series C stock. The move values Sirius XM at $3.68. It's not much of a premium, but that was the risk of letting Liberty take a majority stake. 

Attack of the titans of tech
The connected car has been available for years, and it hasn't hurt Sirius XM. Churn rates remain near historical lows, so folks aren't cancelling, and the subscriber count keeps hitting new highs with every passing quarter.

What happens if the smart car gets smarter? The Wall Street Journal reports that Google and Audi plan to announce a partnership during next week's International Consumer Electronics Show. The two companies plan to create an in-car infotainment platform based on Google's Android that will allow drivers to access music, navigation, and other applications.

Sirius XM has been able to thrive despite the growing ease of smartphone owners to use their handset's online connection to stream music services, but naturally there is some hesitation as to how powerful this new alliance may be.

Apple is also likely to make waves during CES. It introduced its "iOS in the Car" push several months ago, and it expects to have a dozen car brands embracing its platform this year.

The real question here is if Apple and Google are providing a platform that Sirius XM can use to its advantage or if it's leveling the playing field in a way that will make a premium satellite-radio subscription less compelling. For now, Sirius XM's conversion and retention rates show that it's holding up just fine.

Take a hike
Sirius XM announced in October that it will push rates up 3.5% in January. Programming and content costs per subscriber have moved slightly lower, so this will be an interesting test on pricing elasticity.

If consumers accept Sirius XM's new rate of $14.99 a month, it should have a very positive impact on the media giant's bottom line.

Pandora's pulse
Canaccord Genuity issued a bullish note on Pandora, with its analyst encouraged by the streaming music service's ability to milk more ad revenue out of its growing listener base. He thinks Pandora could push its revenue per 1,000 impressions north of $38 in its latest quarter, and his revenue target for the period is more than $10 million ahead of Wall Street's consensus top-line forecast.

Pandora's already been rolling on that front. Investors saw that in its previous quarter when revenue climbed three times faster than usage. The holidays appear to be playing out well, and that's huge, since it seems as if the mid-September arrival of Apple's iTunes Radio is helping more than hurting by validating the niche.  

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Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and Pandora Media and owns shares of Apple, Google, Liberty Media, and Sirius XM Radio. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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