BARCLAYS CITES RISK-REWARD IN LOWER SIRIUSXM RATING.
Investment bank Barclays lowered its rating on SiriusXM Radio stock on Wednesday from a bullish overweight to a neutral equal weight. According to Barclays, the satcaster now has a less favourable risk-reward outlook.
This comes in the wake of SiriusXM’s stock being buoyed recently after Berkshire Hathaway increased its ownership stake to about 3.5% of shares. There have also been recent musings from management of a lower likelihood of a merger with Pandora Media, according to multiple financial publications, and specifically cited by Investors Business Daily. That publication reported that SiriusXM majority shareholder Liberty Mutual “recently threw cold water on speculation that it will buy Pandora, but a possible deal can’t be ruled out.” Liberty owns 67% of the satellite broadcaster.
Perhaps as a direct result, SiriusXM shares fell 1.7% to $5.10 Wednesday. It hit an 11-year high of 5.53 on Feb. 13. Overall, shares of SiriusXM have been robust in 2017, with its stock up nearly 14.5%. In mid-March, it was up almost 22.5%, according to Investopedia. Barclays predicts a stock price target of $4.90.
In its report, The Motley Fool said, “SiriusXM stock may have been a speculative stock a few years ago, but it’s been surprisingly steady by rising every year since the recession- and merger-smacked 2008.” It also assured, “Pessimism and a cautious analyst aren’t fatal. SiriusXM has become one of the market’s biggest winners over the past eight years, in part because of the short squeezes and analyst reversals over that time.”
With the forecast, Barclays analyst Kannan Venkateshwar also offered acute optimism, saying that the satcaster’s stock “has been one of our favorite names over the last few years, on account of its clean execution story, substantial normalized capital returns and visibility of growth rates.” But, he added, “While we continue to like its fundamental story, the next couple of years will likely be a bit different.”
That outlook, Barclays says, comes from its belief that auto sales are heading for a decline: “Sirius has benefited from strong auto sales and rising availability of its service in factory-installed radios, but the auto cycle is slowing,” Venkateshwar said. As well, the bank believes that with 31 million subscribers now, its growth “is likely to ease as the business matures.”
Investors Business Daily responded to the Barclays report saying that SiriusXM has outperformed 92% of stocks in key metrics over the past 12 months.
Inside Radio