Every week Barron's puts out a weekly periodical that is well read within the industry. Companies receiving positive profiles tend to jump in the early part of the next trading week. Sirius XM Holdings (SIRI) leads this week's list of a couple of large cap tech stocks that the magazine gives positive profiles to in the current magazine. Both could be possible movers on Monday after these positive write ups.
I have not covered Sirius since early 2012 when it was trading at $2 a share. The shares have risen some 75% since then but Barron's believes the shares could have another 50% upside.
Among the positives the article cites are the following:
- It is adding better than 500,000 subscribers a quarter and now has more customers than Comcast (CMCSA) or DirectTV (DTV).
- Most of its professional content (sports & news) does not have contracts that come up again until the end of the decade. This is good for expanding margins (now a record 30%) as the subscriber base continues to grow.
- The company could buy back up to 40% of its float over the next five years and post EPS of 30 cents in FY2015.
I also like the fact that Sirius is done with deploying its satellite network which helps cash flow as it no longer has to spend $300mm each to launch new satellites. Operating cash flow has ~doubled since the end of FY2010 and Sirius should continue to benefit as new car sales head back to pre-crisis levels (it is installed in 70% of new cars in the United States). At under $4 a share, the stock still looks enticing.
- The company has a three year lead in the latest cellular technology (LTE). It also spends more on R&D than all of its main competitors combined.
- At 14x forward earnings, it trades near historical low valuations using this metric.
- The company has a robust balance sheet with ~$30B in net cash on its balance sheet ($17 a share). It has used this financial flexibility to increase its dividend payout for 11 straight years and Qualcomm also buys back a substantial amount of its float each year.
- Since it supplies both Samsung and Apple (AAPL), it wins as long as the smartphone market continues to expand. It should also continue to benefit as the world population continues to increase the amount of connected devices each person on the planet owns.
Frequent readers of mine know that I have been a long time bull on Qualcomm and I own it as a core holding of my growth portfolio. I most recently highlighted its value in mid-October and I continue to like its long term prospects.