Sirius XM Stock Is Worth More Than $3.80

Sirius XM Radio receives an analyst downgrade.

Feb 5, 2014 at 5:17PM

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

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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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Liberty Media and 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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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