Why Sirius XM Holdings Inc. Shares Will Soar to $4

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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Sirius XM Holdings (NASDAQ: SIRI  ) gained slightly on Wednesday after Barclays upgraded the satellite radio company from equalweight to overweight.

So what: Along with the upgrade, analyst Kannan Venkateshwar reiterated his price target of $4, representing about 25% worth of upside to yesterday's close. While momentum traders might be turned off by Sirius' sharp pullback during the past six months, Venkateshwar's call could reflect a growing sense on Wall Street that the concerns surrounding its subscriber growth are becoming overblown.

Now what: Barclays thinks that Sirius will eventually be valued as a capital return play versus a growth play. Venkateshwar said:

Despite the slowdown in subscriber growth, we forecast FCF to grow at ~18% on an absolute basis and ~26% on a per share basis (2013-2016 CAGR), driven largely by the company's operating leverage. This is one of the highest growth profiles across other content or distribution companies, most of which are focused on capital returns. In our opinion, this sets up SIRI to buy back at least 10% of its outstanding shares annually for the next few years.

When you couple that upbeat outlook with Sirius' still-beaten down stock price, it's tough to disagree with Barclays' bullishness. 

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