This Week in Sirius XM Radio

Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  )  closed at $3.44, down 2% on the week. The media darling's slide was in line with Nasdaq's 2.1% drop on the week.

There was more going on beyond the share-price gyrations, though. Liberty Media (NASDAQ: LMCA  ) abandoned plans to take over all of Sirius XM's stock, while Sirius reiterated its guidance and also received a bullish analyst note that pegged a $5 price target on the shares. 

Let's take a closer look.

There won't be Liberty for all
John Malone's Liberty Media announced on Thursday after the market close that it's withdrawing its plans to acquire the minority stake in Sirius XM that it doesn't currently own. The eclectic media conglomerate will instead reclassify its stock to create two new tracking stock groups.

The news wasn't necessarily a shock. The offer didn't represent much of a premium at the time, and it's not as if Liberty Media could've sweetened the offer without valuing Sirius XM at billions more than it was willing to offer. Only investors outside of Liberty Media were going to be able to vote, and anyone with an Internet connection could've seen that the vibe among retail investors was that they weren't going to vote in favor of the deal.

Both stocks rose Friday on the news. Sirius XM climbed 2% to make up half of the loss that it had accumulated earlier in the week, and Liberty Media shares popped 7% on Friday. Then again, Liberty Media's increase could be tied to the decision to still split Liberty Media into two entities.

Still on course
Sirius XM took advantage of Liberty Media's withdrawal to announce that it will resume its share buyback initiatives.

The satellite-radio star also reiterated its guidance for all of 2014:

  • It still expects to close out the year with 1.25 million net subscriber additions. This is less than its gains in previous years, but at least it's positive after a sequential dip during the holiday quarter. Self-pay subscribers did climb nicely during the fourth quarter.
  • Sirius XM sees revenue clocking in above $4 billion and adjusted EBITDA of roughly $1.38 billion.
  • Free cash flow should approach $1.1 billion.

Reiterating guidance is typically a non-news event, but it's important for Sirius XM to remind investors of its massive free cash flow generation now that it's a swinging single again.

Moving on up
Sirius XM wasn't the only one to take advantage of Liberty Media's retreat to sing its praises. Bank of America Merrill Lynch reinstated coverage of Sirius XM with a bullish "buy" rating and an even more bullish $5 price target.

The upside is no longer capped by the limits of being part of Liberty Media's collection of media assets. The same can also be naturally said about the downside, but Sirius XM has mad the most of that volatility over the past five years years to deliver market-thumping returns. 

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  • Report this Comment On March 20, 2014, at 8:55 PM, Goyar wrote:

    XM believes that I'll just go away after they have reneged on my lifetime subscription for Internet service after I purchased a lifetime subscription with my car radio I am not going anywhere even though one of their managers Anna 2244 has said after six years of stopping and starting my Internet service suddenly now this unethical organization is saying that I never had an agreement. Wow! the hubris of these people knows no limits . Anna I'm not going anywhere because I had a lifetime contract! all of this because I refuse to go to a month-to-month contract after purchasing a lifetime agreement. they are liars they are unethical do not do business with these people. Hey Anna 2244 I will not go away I am a pissed off consumer. Please feel free to copy and paste this wherever you would like

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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Related Tickers

9/2/2015 10:56 AM
LMCA $36.64 Down -0.14 -0.38%
Liberty Media CAPS Rating: ****
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Sirius XM Radio CAPS Rating: ***