Sirius Downgraded By Buckingham, But Analyst Sees Additional Upside In The Satellite Radio Stock

Sirius XM Holdings Inc SIRI is trading at 12-year highs, and one sell-side analyst projects another 9 percent in upside for the satellite radio stock.

The Rating

Buckingham Research Group analyst Matthew Harrigan downgraded Sirius from Buy to Neutral and raised the price target from $7 to $7.25.

The Thesis

The rating is justified in part by a $6.7-billion gap in the current market value of shares repurchased since 2013, Harrigan said in a Monday note. 

“The ratings downgrade is not premised on any perceived immediate deterioration in fundamentals, but rather price and the availability of Liberty SiriusXM Group Series A LSXMA as a near pure-play SiriusXM investment alternative at a remarkable 33-percent discount,” the analyst said. 

The stock is seen to be riding positive company comparisons against Spotify Technology SA SPOT, and while royalty pressure from the progressing Music Modernization Act could add a headwind, spectrum ownership and read-across from Pandora Media Inc P performance could yield upside, Harrigan said. 

Buckingham forecast a 3.3-percent discount cash-flow growth rate after 2022, which represents a 30-percent premium to media peers.

Recent updates to the iOS and Android apps that improved the out-of-vehicle streaming experience are expected to compound impending investments in Howard Stern video and the integration of 360L hybrid radios in new car models, Harrigan said. 

Price Action

Sirius XM shares were up 0.22 percent at $6.68 at the time of publication Monday.

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