Why Sirius XM Holdings, Inc. Slipped This Morning

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Sirius XM Holdings (NASDAQ: SIRI  ) slipped about 1% this morning after Wunderlich Securities downgraded the satellite radio company from buy to hold.

So what: Along with the downgrade, analyst Matthew Harrigan lowered his price target to $3.80 (from $4.20), representing about 8% worth of upside to yesterday's close. While traders might be attracted to Sirius' potential short-term upside, Harrigan thinks that a sale to Liberty Media (NASDAQ: LMCA  ) is becoming less likely and should therefore be valued on a stand-alone basis.

Now what: According to Wunderlich, Sirius' risk/reward trade-off is pretty balanced at this point. "We now apply just a stand-alone value for SIRI as we are skeptical that there will be a material sweetening of the 0.076 exchange ratio (after a 2:1 C stock dividend) on the Liberty Media (LMCA-$129.86, Buy) bid," noted Harrigan. "Our stand-alone target had been $4.00 vs. $4.30 with a deal, but we are now allowing for a slightly lower 1900 S&P 500 assumption on our market-linked valuation, along with a $120 SPX earnings assumption that bumps up the cost of equity and constricts the 'as is' target to $3.80." Of course, with Sirius shares now off about 10% over the past month, it might be a good time for contrarians to grab the built-in optionality. 

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Read/Post Comments (8) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On February 05, 2014, at 10:35 AM, Thodeas wrote:

    For a stock that should be trading in the mid-$4 to possibly $5 range, investors have substantial reason to question just how extreme the internal manipulation truly is. The valuation provided by Wunderlich Securities begs the question, "Is Wunderlich Securities, or one of its employees, in the pocket of Liberty Media?"

  • Report this Comment On February 05, 2014, at 10:48 AM, kipp33 wrote:

    Never heard of Wunderlich, did they just make that up?

  • Report this Comment On February 05, 2014, at 11:14 AM, 67vair wrote:

    The stock does well and only goes up a penny or two. Gets a downgrade and drops 16 cents? Just a bunch of bull. Manipulation, so that the $3.68 price Liberty wants to pay, looks good.

  • Report this Comment On February 05, 2014, at 12:16 PM, Varchild2008 wrote:

    What is Wunderlich doing valuing SIRI differently based on wheter it is taken over or not?

    Do they not see the obvious value in SIRI as a standalone company? The share buyback program is back online in April. It disappears altogether if SIRI is bought out.

  • Report this Comment On February 05, 2014, at 1:05 PM, sirifair6 wrote:

    Matthew Harrigan of Wunderlich has done this before. The guy has no shame. A few years ago he downgraded siri on the eve of a conference call. How dumb one has to be to do that.

    For the first time in many years I was truly pleased with siri's Q4 and 2013 results. CC also clearly showed that the company is going to rake in money in huge amounts. There is nothing, not a thing, in the way of the company.

    It is obvious that Meyer low balled the 2014 revenue and possibly fcf guidance as well. That siri will exceed $4.2B for the year is not obviuos only to Meyer who keeps mudding waters to make his bosses happy.

    Now it is important just to persevere and vote a fat NNNNNNNNNNNNNNNNN0000000000000 to liberty's insulting offer. I hope the retail community will win the battle because many institutions should be unhappy with liberty as well.

  • Report this Comment On February 05, 2014, at 1:07 PM, nofoolingforme wrote:

    While these so-called analysts see it as a negative thing for the buyout offer to fail, it is really a very postitive thing for SIRI investors. Once the buyout distraction is eliminated, the company can again be seen for its intrinsic value and potential.

    For the past couple of years, the quarterly reports have been great with growing numbers across the board. In spite of all of the negative talk about the competition bringing Sirius down, subs, profits and margins keep on going up and up.

    Liberty Media has their own agenda, but, they really can't lose if they drop the offer and leave Sirius alone so that it increases shareholder value without being swallowed up by them. Instead of being so greedy that they want to own it all, it should be clear to them that they are getting 50 plus percent of all the profits and share value, so leave well enough alone and enjoy being in the driver's seat of such a company.

  • Report this Comment On February 05, 2014, at 2:04 PM, rbsiristox wrote:

    well first let me say in your article that you use the term (sale) which in all intense and purpose is correct in my opinion. In regards to liberty media taking over siriusxm. and many other articles that I have read use the same terminology, but there is those they say that's not true, that it is a swap or take under , or take over, but I do not care what you call it the fact is it highly undervalues the shares, if you look up the enterprise value of sirixm you will see it says $6.76, now the definition of enterprise value is for the takeover takeout, buyout ,or whatever,so by looking at that one metric alone one can see that it has been badly undervalued,and the BOD at Sirius does nothing, they should be rejecting this ludicrous offer

  • Report this Comment On February 05, 2014, at 7:44 PM, countryjoe29 wrote:

    Actually, out of all I've read lately, I think the most sense come from the following:

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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Related Tickers

8/28/2015 3:59 PM
SIRI $3.83 Up +0.04 +1.06%
Sirius XM Radio CAPS Rating: ***
LMCA $37.38 Up +0.26 +0.70%
Liberty Media CAPS Rating: ****