On Thursday Piper Jaffray upgraded the price target for Sirius XM (SIRI) to $5 a share due to higher revenue estimates based on the used car initiative, the new Hispanic marketing and the future of the connected car. The general consensus among analysts is Buy, with a consensus target of $4.31. Here are the most recent analyst ratings and target price changes for Sirius:
|Ratings Breakdown:||5 Hold Rating(s), 15 Buy Rating(s)|
|Consensus Price Target:||$4.31 (9.68% upside)|
|Date||Firm||Action||New Rating||Old Price Target||New Price Target||Details|
|9/26||Piper Jaffray Cos.||Raise Estimates||Overweight||$4.50||$5.00||View|
|7/31||Barclays Capital||Initiated Coverage||Overweight||$4.50||View|
|7/23||Wunderlich||Boost Price Target||Hold||$3.50||$4.00||View|
|7/18||Maxim Group||Boost Price Target||Buy||$4.20||$4.60||View|
|6/24||Bank of America Corp.||Reiterated Rating||Buy||$4.00||View|
This price upgrade came on the heels of a presentation by Sirius CEO Jim Meyer at the Golman Sachs Communicopia Conference on Thursday. At first glance there was nothing new to report. However at the end of the presentation, the topic of Sirius going global came up. This has been a major point of contention among investors over the last year. Many feel that it would be too costly to launch new "international" satellites. Sirius currently has a Canadian subsidiary called Sirius XM Canada, an affiliate company that provides Sirius and XM service in Canada via satellite. However Meyer took that option off the table. In the future Sirius will offer its services internationally via streaming in the new globally connected cars that will be coming out:
One last one from me, we talked a lot about investments been made in IP and in telematics. As we sort of look beyond that any incremental growth opportunities for SIRIUS XM that are on your radar screen you think the company can participate in over the longer term?
Jim Meyer - Chief Executive Officer
Yes. And its one I get a lot including from our board which is, when are you going to go international? And you know what one of the -- one of the clear things about the connected car strategy is it's also the auto makers are using as global platforms. And so one of the reasons why it's key, I think that we participate in that rollout and that building, in that architecture is it is going to give us opportunities to look at services on an international basis that are different than what we've done here in the U.S. For instance, I don't believe we're going to launch satellites anywhere else in the world and offer satellite radio. I think all of our services also will be streaming base, but I do see a real opportunity internationally but it will be evolutionary not revolutionary.
It's nothing in the near term, it sounds like this is more of a longer term?
Jim Meyer - Chief Executive Officer
No. I mean, I could tell you we continue to look at Mexico, but we don't have anything to talk about it yet today.
As I wrote in an article earlier this year, many investors have been speculating that the takeover of Sirius by Liberty Media (LMCA) would lead to global expansion. Considering a remark made by Liberty Media Chairman, John Malone to the Wall Street Journal last summer this is something that investors can probably bank on:
So I tend to be looking out 10 or 20 years, whereas I think Mel (Karmazin) in all honesty right now has got a pretty short-term focus. I think they do an excellent job of running the company (Sirius) but we would be making more investments and...would at least look at globalizing.
But globalization will not happen overnight, because the connected car will not happen overnight. OEM's move very slowly as they implement changes in new vehicles which can take years. As Meyer said at the conference (link above):
And I want to be clear. This isn't going to happen in six months. This is a march not a sprint. It's going to be a long clear path which is what we have done, if you look at what we've done with the automakers over the last seven or eight years, thank God, for a lot of our investors being patient with us as it's taken us to get to 70% penetration or high 60s in satellite radio. Our goal is the same thing in the connected car area.
There are numerous other IP radio services which are all competing for a spot on the connected car's dashboard. Pandora (P), Apple (AAPL), and Google (GOOG) all have streaming radio. However, Meyer was quick to point out that these services do not have the same content that Sirius is so famous for. Many Sirius subscribers gladly pay to hear live sports, and talk shows like Howard Stern. In the Jaffray note (link above) analyst James Marsh said:
"while we expect music-oriented services to get more competitive over time, we believe that SiriusXM's exclusive non-music deals, strong relationship with OEMs, frictionless billing relationship, and new push into smart phones and in-car telematics should help offset these risks to growth."
The quarter is ending in a few days which means Sirius may make a subscription announcement as early as Tuesday. A jump in subs could send shares higher as investors digest this global news. Tuesday is also the day that the government is scheduled to shut down if Congress gets its way. Any dips will offer buying opportunities for Sirius Bulls. But those may be gone as we head into the middle of October when there is the traditional "run up to earnings" and the options close. Short interest in Sirius has jumped to over 305 million shares which will take eight days to cover. This is the highest it has been since July. Any positive announcements will send the shorts scrambling to cover forcing the price higher.
According to NASDAQ:
Sirius has been on a steady climb for the last five years. There is no reason to think that this will stop anytime soon as it marches toward $5 a share. When the globally connected car hits the streets overseas, it might be equipped with a Sirius XM radio and/or a multitude of other electronic gadgets and services designed by Sirius. Right now this is pure speculation, so investors will have to wait for any formal announcements. But having Malone and Meyer in agreement is a huge first step.
Because of this, Liberty may not sell its shares right away as many had anticipated. This is a cash cow that just keeps producing with no end in sight. And that keeps the Sirius Bulls happy.