The pairing of Pandora Media (NYSE:P) and Sirius XM Holdings (NASDAQ:SIRI) is now one major step closer to becoming a reality, and analysts like what they see. B. Riley resumed coverage of Sirius XM with a buy rating on Tuesday afternoon, hours after Pandora shareholders approved the corporate combination. B. Riley has a price target on the stock of $8 (the highest among all analysts), suggesting nearly 40% of upside from current levels. 

B. Riley wasn't the only firm putting out an upbeat note on the satellite radio provider this week. Matthew Harrigan at Buckingham upgraded the stock from neutral to buy on Monday, widely expecting a positive vote from Pandora shareholders the following day. Harrigan also figured that Sirius XM would wax positive on the benefits of the acquisition during this morning's fourth-quarter earnings call. 

Pandora app streaming on a dashboard touchscreen.

Image source: Pandora.

The deal is right

Pandora shareholders voted overwhelmingly for the combination of the two companies on Tuesday. Just 75% of the shares participated in the vote, but of those a whopping 97% voted in favor of the deal. 

The union of Pandora and Sirius XM won't be a merger of equals. Pandora shareholders will be receiving 1.44 shares shares of Sirius XM for every share they currently own, but it ultimately adds up to just 8% of the total shares outstanding. This also isn't an acquihire, as many top Pandora executives including its CEO will be stepping down when the handoff is complete. 

This is still a smart deal. Sirius XM will be able to make a strong push into streaming services, opening up the options if the fundamentals begin to crack in the car-friendly realm of satellite radio. The two companies will be able to cross-sell each other's services, and there will be synergies as redundancies are eliminated. Pandora's profitability has been spotty in the past, but it won't weigh on Sirius XM's bottom line. When you're generating $1.5 billion in free cash flow a year, you can afford to take a chance on big platforms generating meager profits. 

Pandora and Sirius XM hooking up made sense long before the deal was announced late last year and even well before Sirius XM took a minority stake in the streaming pioneer. An analyst upgrade on Monday and the resumption of bullish coverage from another Wall Street pro are also right, and it's probably just the beginning of the accolades for one of the hottest stocks over the past decade. 

Rick Munarriz owns shares of Pandora Media. The Motley Fool owns shares of and recommends Pandora Media. The Motley Fool has a disclosure policy.