Sirius XM Holdings (NASDAQ:SIRI) can keep a beat going, judging by Wednesday morning's earnings report where it beat Wall Street expectations on both ends of the income statement. It was a record performance on the top and bottom lines, as revenue rose 6.4% to hit $1.467 billion for the third quarter with net income soaring 24.4% to land on $343 million or $0.07 a share.

This is Sirius XM's largest quarterly revenue report, and that's not a surprise since the satellite radio giant has been posting consistent sequential growth in subscribers for years and average revenue per user keeps inching higher. Sirius XM tacked on 298,000 net new self-pay subscribers during the months of July, August, and September, lifting that total to 28.5 million. There are now 33. million total subscribers. 

The quarterly profit of $0.07 a share is also a high-water mark for organic earnings. There was a quarter back in 2012 that was a monster report on the strength of a huge accounting benefit, but this is its most profitable organic quarter. Sirius XM is at the the top of its game, but the market doesn't seem to be watching the game.

Katy Perry at Sirius XM's Hits 1 channel.

Katy Perry. Image source: Sirius XM Holdings.

Rolling with the changes 

Wednesday's report is the first time that adjusted EBITDA margin clocks in north of 40%, and the media giant is jacking up its full-year guidance. Strong financial results and a generally resilient market would suggest that Sirius XM shares should be cranking out new highs, but they're not. The stock opened slightly higher on the strong quarterly report, but even then we're still more than 20% off the June's highs.

Sirius XM was weakening even before last month's acquisition announcement. Sirius XM expects to close on its purchase of Pandora (NYSE:P) -- an all-stock deal now worth less than $3 billion with Sirius XM's price to purchase the 85% of Pandora that it doesn't own closer to $2.5 billion in freshly issued stock -- in the first quarter. The deal still needs to clear regulatory hurdles, but the "go shop" period in which a rival suitor for Pandora could've stepped up with a bigger engagement ring ended this week. 

It's fair to say that Sirius XM is in a better place than its stock chart, just as it's also valid to argue that the market is underestimating the power of a Sirius XM-Pandora hookup. Sirius XM has been one of the market's biggest winners since bottoming out in early 2009, but a strong case can be made now for Sirius XM being undervalued. It keeps growing, with earnings growing even faster given the scalable model. Sirius XM even pays a modest dividend, giving income investors something to chew on. 

Sirius XM is beefing up its full-year guidance. It's lifting its subscriber, revenue, and adjusted EBITDA targets, only leaving its free cash flow goal where it was three months ago. Sirius XM seems to be doing just about everything right, and now it just needs to wait for the market to notice.

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