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This Week in Sirius XM Radio

By Rick Munarriz - Mar 22, 2014 at 7:30AM

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Satellite radio is always on the move with Sirius XM.

Things never get dull for the country's lone satellite radio provider. Shares of Sirius XM Radio ( SIRI 1.62% ) moved lower on the week, sliding 2.6% to close at $3.35. The media darling's slide was a sharp contrast to the Nasdaq's 0.7% ascent on the week.

There was more going on beyond the share price gyrations, though. Another analyst reinitiated coverage this week after Liberty Media ( FWONA ) set aside plans to swallow all of Sirius XM. And Pandora ( P ) increased the price of its premium streaming offering to the point where it now costs more than Sirius XM's add-on streaming option.

Let's take a closer look.

A bull returns
A few analysts suspended their coverage of Sirius XM when Liberty Media was looking to acquire all of the satellite-radio star, but now that Liberty Media has suspended that master plan, we're seeing Wall Street pros returning to their typically bullish stances.

Merrill Lynch reinstated its positive rating with a $5 price target late last week, and Evercore kicked off this week by following suit with a more modest $4.50 price target.

The move didn't help. Sirius XM's close of $3.35 was its lowest since last summer.

Pandora breaks out of the box
It's not just Amazon.com's Prime getting more expensive this month. Pandora is pushing up the price of its premium Pandora One platform by 25% to $4.99 a month. The move prices Pandora's ad-free service at a higher price point than the $4 a month that receiver-based Sirius XM subscribers can pay to add streaming to their plans.

Pandora argues that the bump is overdue. The company hasn't increased its Pandora One rate in five years, yet as Sirius XM investors know all too well, the royalties that these two companies pay out to musical artists has increased sharply over the years. Sirius XM has been able to push through two increases over the past three years, so it isn't a surprise that Pandora is passing on its escalating content costs to its premium listeners. 

Now, it's important to remember that there aren't too many people paying Pandora these days. Only 3.3 million of its 75.3 million active listeners are currently paying for Pandora One. However, increasing its rate in May -- and grandfathering in music buffs who were on board before then to the current $3.99-a-month price -- could help convert a few more of its freeloaders. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
SIRI
$6.27 (1.62%) $0.10
Pandora Media, Inc. Stock Quote
Pandora Media, Inc.
P
Liberty Media Corporation Stock Quote
Liberty Media Corporation
FWONA

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