One of the leading voices in satellite radio and audio streaming, SiriusXM (SIRI), was recently shot in the arm by no less than Conan O’Brien. SiriusXM’s new addition will give it a little more muscle as it looks to up its streaming side.
Yet, as the stock is currently experiencing a small rally today, will that be enough going forward?
I’m bullish on SiriusXM, thanks to several factors. Certainly, society will be affected by a decline in disposable income that will almost certainly follow in the face of a possible future recession. Rising commodity inflation won’t help either. However, there should still be a good deal on hand.
The last 12 months for SiriusXM shares have been extremely volatile – but within a very narrow range. Over the past year, the company has traded between approximately $5.70 per share and $6.75 per share. The company is up from the same time last year, but only about $0.40 per share.
The latest news is proving useful so far. SiriusXM recently purchased Team Coco, the digital media company owned by Conan O’Brien. The deal includes 10 different podcast properties, including the celebrity interview show Conan O’Brien needs a friend. Conan O’Brien also agreed to join SiriusXM for five years, producing the comedy channel Team Coco for the platform.
The Taking of Wall Street
As far as Wall Street is concerned, SiriusXM has a Moderate Buy consensus rating. This is based on four buys and one sell attributed in the past three months. The average SiriusXM price target of $7.65 implies 22.3% upside potential.
Analyst price targets range from a low of $7 per share to a high of $8.20 per share.
Investor sentiment is a seriously mixed bag
SiriusXM currently offers a smart “perfect 10” score on TipRanks. This is the highest level of “outperformance” and suggests a strong buy may be underway. When it comes to investor sentiment, however, clearly not everyone shares that sentiment. In fact, there are almost as many negative feelings as there are positive ones.
Hedge funds, based on reports from the TipRanks 13-F Tracker, are making a comeback. The calamitous fall that occurred from September 2021 to December 2021 has been partially reversed, although holdings have only increased slightly.
Hedge funds have boosted SIRI’s holdings from around 2.45 million shares in December 2021 to around 3.18 million shares in March 2022. That’s a pretty big jump – nearly 50% from in the previous quarter – but that’s not even a patch on the roughly 46.9 million shares held in September 2021. It’s also a drop from the roughly 136.22 million shares held in March 2020.
Meanwhile, insider trading at SiriusXM is heavily weighted to buys. No buy or sell trades have been recorded since February 2022, but then buy trades outpaced sell trades by 19 to 4. For the full year, buy trades were again well ahead, coming in at 88 against 19 sales.
Retail investors – at least those with portfolios on TipRanks – are turning a lot to SiriusXM stocks. TipRanks portfolios holding SiriusXM are down 1.2% in the last 30 days and 0.8% in the last seven days. The rate of decline may be slowing down a bit, but it’s still a downward slope.
Finally, there is the matter of SiriusXM’s dividend history. The dividend may be minimal, but it has been paid consistently, even during the pandemic, for the past five years. Better, the dividend has increased. In November 2021, SiriusXM doubled its dividend from $0.01 per share to $0.02 per share.
A growing and diversified package
Let’s tackle the elephant in the room right away. SiriusXM will almost certainly take a hit if – or perhaps when – a recession hits. It’s probably already on the chopping blocks of a few households.
Paying for radio service at a time when free-to-air radio already exists — and when gas prices threaten to smash $5 a gallon in many places — just doesn’t work for some budgets.
However, SiriusXM has one key advantage, and it’s in its application. The application contains much, much more content than the radio part. This is where SiriusXM’s greatest value lies. As we’ve seen here with the Conan O’Brien deal, SiriusXM is expanding its lineup of podcasts and content accordingly.
In fact, SiriusXM, back in February, managed to find a way to track users across its stable of apps, including Pandora and Stitcher. This will help improve its record with advertisers and make ad buying on the platform much more attractive.
With a growing content library, SiriusXM can more actively attract not only advertisers, but also users. This makes subscription fees potentially something sustained even during a recession. Entertainment budgets inevitably take a hit because you can’t eat fun. Nevertheless, a life spent too long without pleasure is also much less worthwhile.
With Stitcher, a podcast app that SiriusXM bought for $325 million in 2020, providing some extra muscle, podcasts are returning as an audio alternative to video streaming.
It also gives them a few more use cases. Watching a video while driving is inadmissible and often illegal. Listening to a podcast, however, is perfectly viable. The same goes for listening to an audiobook or even music.
Since SiriusXM can offer all of this, it can better access the growing number of use cases and benefit accordingly. I personally managed to get through most of Charles Dickens’ long summer work on the lawnmower, thanks to the audiobook versions.
That doesn’t count all the people listening during exercise or whatever. All of those ears mean a direct benefit to SiriusXM.
SiriusXM will undoubtedly be affected by a future recession. Soaring inflation numbers will likely affect this market as well. However, we are talking about a company with a growing number of use cases, rapidly improving value for consumers and advertisers, and a stock price that is currently below the lowest targets.
Add all of these points together and you have a profile that deserves closer examination. I’m bullish on SiriusXM. The company took steps to survive a downturn. Its share price is also attractive. Obviously, it is ready to welcome more investors to help it move forward.
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