Analyst: Why Choose Between Sirius XM And Liberty SiriusXM When You Can Buy Both?

Competitive moats and upcoming innovations make both Sirius XM Holdings SIRI and its tracking stock Liberty SiriusXM Group LSXMA attractive buys, according to the Buckingham Research Group. 

The Analyst

Matthew Harrigan of The Buckingham Research Group initiated coverage with a Buy rating on Sirius XM ($6.50 price target) and Liberty SiriusXM Group ($54 price target).

The Thesis

SiriusXM's large market share and constant innovation of its product line result in what Harrigan describes as a "superior business framework” and make the company “formidably positioned as the only domestic entrant in satellite radio.” (See the analyst's track record here.) 

SiriusXM is the only U.S. satellite radio operator and has a customer base of 32.7 million users, according to Buckingham. SiriusXM radios are installed in 104 million out of 250 million cars on the road. This figure is expected to grow to 185 million in 2025 as a result of “stable new car sales and the increasing prevalence of [SiriusXM] radios in used cars," Harrigan said. 

SiriusXM is expected to introduce the 360L advanced radio system in 2018, according to Buckingham.

The 360L hybrid satellite/streaming model is “a prospective game changer” that is expected to appeal to a wide customer base across generations, Harrigan said. 

“360L offers a more adaptable user interface [and] driving functionality, including time-shifting content on demand, personalizing stations and advanced display and accessibility for sport content," the analyst said. SiriusXM is also in the process of beta testing enhanced versions of its iOS and Android apps and integrating Amazon.com, Inc. AMZN's Alexa, giving users a higher degree of flexibility across platforms.

With Sirius XM's strong competitive position, Harrigan also attached a Buy rating to the Liberty Sirius XM Group tracking stock. Liberty Sirius Group owns approximately 69 percent of shares of SiriusXM, which is its sole asset. For this reason, LSXMA’s drivers are almost entirely related to SiriusXM’s drivers, and Harrigan said he is therefore bullish on LSXMA as well.

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