It's not a surprise to see Sirius XM Holdings (NASDAQ:SIRI) falling alongside many consumer-hungry stocks in this climate. However, with the shares falling to a three-year low last week, one Wall Street pro feels that the sell-off is overdone. 

Jason Bazinet at Citi is upgrading shares of the satellite radio provider on Tuesday, boosting his rating on Sirius XM from neutral to buy. He is lowering his price target on the stock from $7 to $5.90, but that's not a bad thing given how sharply the shares have fallen since his last update. His new price goal calls for a 23% increase from current levels. 

Katy Perry in a Sirius XM town hall presentation.

Image source: Sirius XM Holdings.

Pumping up the volume on the new normal

These are understandably challenging times for Sirius XM. It relies largely on an audience of morning commuters to fuel its platform, which people engage with largely in automobiles, and obviously there aren't a lot of people driving to work right now. Sirius XM also relies on new-car sales to fuel subscriber growth, and that's a channel that was sluggish even before COVID-19 hit. 

With the inevitable economic slowdown looming, there isn't likely to be a turnaround in new- or even used-car sales for some time. Consumers will be trimming their overhead, and it's easy to predict that churn will inch higher at Sirius XM as cancellations start to trickle in. 

Sirius XM was already trying to adapt to a future beyond satellite radio, pushing its streaming offerings and closing on its $3.5 billion deal for Pandora early last year. It also took a minority stake in open audio platform Soundcloud earlier this year. Sirius XM also offers cheaper packages that don't include in-car access, product lines starting at $8 a month that it's surely trying to push to folks calling in to cancel. 

The near-term outlook isn't very encouraging for a stock that has been one of the market's biggest winners over the past 11 years. It was already expecting top-line growth to slow to 4% this year before the coronavirus headwinds kicked in. After a decade of adding at least a million net subscribers to its rolls every year, it was already forecasting that it would fall short of that mark in 2020, and now that's pretty much a certainty. 

Citi's Bazinet still likes Sirius XM's chances here, and he continues to be fond of Liberty Sirius XM (NASDAQ:LSXMA), the Liberty-helmed tracking stock that has historically traded at a discount to its satellite radio position. As rough as things have been for Sirius XM this year, 2020 has been even harder for holders of Liberty Sirius XM, with that investment trading 37% lower year to date than the 33% slide in Sirius XM itself. In short, the deep discount in Liberty Sirius XM stock is actually widening. 

Investors will have to be patient here. Bazinet thinks that Sirius XM shares will approach $6 by the end of next year. The challenges are daunting right now, and the next few quarters after that will be dictated by how quickly the economy bounces back as consumers brace for a recession. Good news will be hard to come by for now, but with the stock already sharply lower it's easy to see why at least one analyst believes the pessimism has gone too far.