You like to listen to it in your car, but would you invest in its stock? Sirius XM Holdings (SIRI 0.33%) is the one and only satellite radio broadcaster, and its shares win attention simply because of that fact.
One analyst believes that there are other compelling reasons for owning Sirius XM, not least that the stock has some powerful upside. He advises investors to seriously consider tuning into the company for the strong returns it can produce.
A bull remains steadfast
To call prognosticator Jeffrey Wlodarczak of Pivotal Research a Sirius XM bull is a big understatement. As April came to a close, he reiterated his buy recommendation on the stock at a price target of $4.90 per share. That's nearly 70% higher than the stock's most recent closing price.
Wlodarczak's move feels somewhat counterintuitive, as it comes on the heels of a disappointing earnings report from the unique entertainment company.
In its first quarter, Sirius XM reported only incremental (0.8%) year-over-year revenue growth to $2.16 billion. Net income saw a more dramatic rise of 14% to $265 million. Both headline figures more or less met analyst expectations, but the company's revenue guidance fell just short. This combination clearly discouraged investors, who traded the shares down by more than 7% that day.
The company's essentially in-line performance led Wlodarczak to leave his existing estimates intact. In his latest Sirius XM research note, he wrote of the benefits the satellite radio broadcaster should reap from its out-of-car app, and its personalized marketing.
User base issues
While Sirius XM has an unbeatable and powerful position in its market, it's finding it hard to grow its numbers.
Satellite radio is very far from being a novelty, and folks have either signed up for the service or aren't interested at this point. It's difficult, after all, to find new converts for well-established technology. Unless management finds a way to rope in vastly more users or create new revenue streams, I don't think this is an exciting investment despite the impressive -- and very useful -- technology.
