Sirius XM Stock Is Worth More Than $3.80

Sirius XM Radio (NASDAQ: SIRI  ) is heading lower for the fourth trading day in a row. The trigger this time is a Wunderlich Securities analyst downgrade

Bulls will argue that Wunderlich doesn't always get it right when it comes to the satellite radio provider. They can point to the time that it downgraded shares of Sirius XM four years ago, slapping it with a $1 price target. The analyst came around a few months later, but the following year Wunderlich downgraded the stock again, taking its price target down from $2 to $1.65.

Is Wunderlich analyst Matthew Harrigan's latest downgrade -- taking his rating on the shares from buy to hold and slashing his firm's target price from $4.20 to $3.80 -- another regrettable moment?

Well, Harrigan is concerned about Sirius XM's role in the mobile-connected car of the future. 

"We also came away from the January CES show with a conviction that tech companies and OEMs are now regarding the car as the world's largest mobile device with a vast array of new apps in queue," he writes, as retold at Benzinga.com

Sirius XM has laughed at this knock in the past. Connected cars haven't been the end of satellite radio. In fact, Sirius XM bragged a year ago that buyers of connected vehicles were just as likely to sign up for Sirius XM as those behind the wheel of traditional low-tech cars. 

However, this does then lead us to the problematic conversion rate in Sirius XM's quarterly report yesterday. Buyers of cars with factory-installed Sirius or XM receivers typically become self-paying customers between 44% and 46% of the time after they check out the media platform's free trial. Unfortunately, yesterday we learned that the conversion rate during the last three months of 2013 clocked in at just 42%.

Is this a fluke or the beginning of an unwelcome trend? Sirius XM has been so prolific in the past that it deserves the benefit of the doubt. However, if it doesn't bounce back in its next quarterly report, it's going to suggest that smartphones in smart vehicles is a problem.

Harrigan also feels that Liberty Media  (NASDAQ: LMCA  )  isn't going to materially sweeten its bid to buy the minority stake in Sirius XM that it doesn't already own. The exchange ratio it originally offered wasn't much of a premium, and shares of Liberty Media have inched lower since then. The good news for potential investors now is that Sirius XM's stock is trading lower since that time. With the Liberty Media buyout creating a floor for the stock as long as it's still hovering about, this stock dip appears to be a buying opportunity.

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Read/Post Comments (5) | Recommend This Article (11)

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  • Report this Comment On February 05, 2014, at 6:26 PM, sirifair6 wrote:

    Rick, below is an excerpt from of a brilliant and hilariuos post made on September 30, 2010 about Matthew Harrigan' siri downgrade at that time.. .

    The poster was responding to a question one of the readers what a "baffoon" means !!! 1.

    " An analyst that would downgrade a stock a day before the CEO speaks and within 7-10 days before quarterly sales numbers come out...most likely...a buffoon is a possible name for this analyst or you could also use the term crook or idiot...your choice... Take your undervalued downgrade and put it somewhere you won't forget it...take it out in a year and let me know what you think..."

    This comment is as pertinent today as it was four years ago. Matthew Harrigan remains a baffoon with unclear agenda and lack of ethics!!!

  • Report this Comment On February 05, 2014, at 11:21 PM, Thodeas wrote:

    I must admit I had not heard of Matthew Harrigan, or the company for which he works, before today; but, to use the term "baffoon" to describe him is being overly polite. The scary thing is that investors, who at some point should be doing their own analysis, actually consider his analysis as worthy of consideration. Personally, I'm betting that someone with a large amount of money (along with an insatiable desire to have his way) is using these so called analysts, such as Harrigan, to manipulate the stock price.

  • Report this Comment On February 06, 2014, at 2:40 PM, Palouse wrote:

    If the number of new cars coming out with Sirus installed is going up isn't it possible that the conversion rate could go down while the actual number of cars being converted goes up? So instead of looking at a conversion rate shouldn't we be looking at number of cars being converted?

  • Report this Comment On February 06, 2014, at 3:25 PM, Guggerpaul wrote:

    For every existing subscriber who bought a new car in recent months we lost a sub for 3 months to 1 year. I saw an add on the TV a little while back and they were offering 2 years free with a car lease in my opinion this is in fact the reason for the slight slow down in sub adds and they should begin to return in the next two quarters. It is also my belief that this was intentionally done by Malones henchmen over at Siri to assist in the attempted theft of siriousxm by Liberty. buying more voting "NO" Siri needs to stay independent!

  • Report this Comment On February 06, 2014, at 4:06 PM, sirifair6 wrote:

    I agree that in the next few quarters the company will catch up. But in all truth I always cared about one sub number, namely, self-pay subs. These are the subs who become paying customers that usually pay up for the whole year or more with or without discount.

    In Q4, 2013 siri picked up about 420K os self pay subs that was less by 100K than in 2012 Q4. Still, with further penetration in the used car market and slightly growing OEM we can safel expect this year over 1.6M self pay subs.One of the major contributors here may become the Hispanic market attracted by Hispanic radi hall of famer Pioline. Although Hispanic rates are $6.99 I am confident then more than 50% of new Hispanic customers will sign up for the full package including sports and talk shows.

    After ten years of being invested in siri I have never felt as confident about the bright future of the company as after the Q4 announcement. We will see numbers that even optimists like me never expected.

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