Sirius XM Holdings (NASDAQ:SIRI) took a hit after falling short of Wall Street revenue and profit targets on Wednesday, but at least one Wall Street pro sees the slide as a buying opportunity. Jeffrey Wlodarczak at Pivotal Research upgraded the stock on Thursday, arguing that the previous day's 7% earnings-related sell-off was overdone. 

Wlodarczak is lifting his rating on the satellite radio provider from "hold" to "buy." He thinks Sirius XM is already making some serious headway in monetizing the Pandora Media acquisition that closed nearly three months ago. The analyst believes last week's report -- while not perfect given the slightly lower than expected goals for new car installations and self-pay net subscriber additions for 2019 -- doesn't detract from the long-term potential of Sirius XM. 

Eminem at his Sirius XM radio show.

Image source: Sirius XM Holdings.

Lucky number seven

Wlodarczak is sticking to his earlier $7 price target on the shares, and that's not a problem. It was understandable to be neutral with a $7 goal when the shares were trading above that mark in the spring and early summer of last year, but with the stock now well below that mark, it represents 21% of upside from current levels. 

Some may argue that Wlodarczak's upgrade is hollow because he's merely playing into the sell-off, but this is a good thing for the bullish camp. He could have simply kept his rating neutral and lowered his price target to $6, if not slightly lower. 

Sirius XM Holdings is in a better place than last week's sell-off suggests. It now commands an audience north of 100 million across its service. Paying listeners may now number just a little more than a third of that -- there are more than 29 million self-pay satellite radio subscribers, as well as another 6.2 million Pandora premium listeners -- but even the Pandora ad-supported free users and folks on Sirius XM trial subscriptions matter. Users listening to Pandora for free and folks on trial satellite radio plans make up the ideal target audience for premium subscriber growth.

Satellite radio will continue to be the driver here, and the platform continues to show improvement, with steady churn and average revenue per user growing at its headiest clip in years. Sirius XM expects to have its receivers roll out on 80% of the new cars sold next year, and deeper penetration into new vehicles eventually works its way into the used-car market. There are now 119 million cars on the road with satellite receivers, 11% ahead of where that count was a year ago -- but still just 45% of the total car market. The opportunities will continue to come for growth even if auto sales run sluggish.

Sirius XM may be out of favor now, but with one new Wall Street bull and countless more opportunistic investors eyeing last week's sell-off as a buying opportunity, the shares may not stay out of favor for long.