Stock Analysis & Ideas

SiriusXM Gets a Boost from Conan O’Brien

Story Highlights

SiriusXM added Colin O’Brien’s podcast network to its lineup. With inflation on the rise and a recession lurking, will Team Coco’s brand of comedy help make SiriusXM a good investment? Maybe, but that’s not all SiriusXM has in store.

One of the leading voices in satellite radio and streaming audio, SiriusXM (SIRI), recently got a shot in the arm from no less than Conan O’Brien. SiriusXM’s new addition will give it quite a bit of extra force as it seeks to augment its streaming side.

Yet, as the stock is currently enjoying a small rally today, will it be enough going forward?

I’m bullish on SiriusXM, thanks to several factors. Certainly, the company will take hits from a decline in disposable income that’s almost certain to follow in the face of a potential upcoming recession. The inflationary rise of basic staples won’t help either. However, there should still be a good slug of business on hand.

The last 12 months for SiriusXM stock have been extremely volatile – but over a very narrow range. Over the last year, the company has traded between about $5.70 per share and $6.75 per share. The company is up from where it was this time last year, but only by about $0.40 per share.

The latest news is proving helpful so far. SiriusXM recently purchased Team Coco, the digital media company owned by Conan O’Brien. The deal comes with 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 Team Coco comedy channel for the platform.

Wall Street’s Take

Turning to Wall Street, SiriusXM has a Moderate Buy consensus rating. That’s based on four Buys and one Sell assigned 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 One Seriously Mixed Bag

SiriusXM currently carries a ‘Perfect 10’ Smart Score on TipRanks. That’s the highest level of “outperform” and suggests a screaming buy possibly in the making. Looking at the field of investor sentiment, though, it’s clear not everyone shares that sentiment. In fact, there’s almost as much negative sentiment as there is positive.

Hedge funds—based on the reports from the TipRanks 13-F Tracker—are making something of a comeback. The calamitous plunge that occurred from September 2021 to December 2021 was partially reversed, though holdings only rose slightly.

Hedge funds took SIRI holdings from around 2.45 million shares in December 2021 to around 3.18 million shares in March 2022. That’s a fairly big jump—close to 50% over the previous quarter—but it’s not even a patch on the roughly 46.9 million shares owned in September 2021. It’s also a plummet from the roughly 136.22 million shares owned in March 2020.

Meanwhile, insider trading at SiriusXM is heavily buy-weighted. There have been no buy or sell transactions recorded since February 2022, but then, buy transactions outstripped sell transactions by 19 to four. For the full year, meanwhile, buy transactions were once again way ahead, coming in at 88 against 19 sells.

Retail investors—at least those who hold portfolios on TipRanks—are turning on SiriusXM stock substantially. TipRanks portfolios holding SiriusXM were down 1.2% in the last 30 days and down 0.8% in the last seven days. The rate of decline may be slowing a bit, but it’s still a downhill slide.

Finally, there’s the matter of SiriusXM’s dividend history. The dividend may be minimal, but it was paid out regularly—even during the pandemic—for the last five years. Better, the dividend increased. Back in November 2021, SiriusXM doubled its dividend from $0.01 per share to $0.02 per share.

A Growing and Diverse Package

Let’s address the elephant in the room right away. SiriusXM will almost certainly take a hit if—or perhaps when—a recession hits. It’s already probably on a few households’ chopping blocks as it sits.

Paying for radio service at a time when there’s already free broadcast radio out there – and when gas prices threaten to break $5 per gallon in many places – just doesn’t work for some budgets.

However, there’s one key edge that SiriusXM has, and that’s in its app. The app contains vastly, vastly more content than the radio portion does. That’s where SiriusXM’s biggest value lies. As we saw here with the Conan O’Brien deal, SiriusXM is bulking up its line of podcasts and content accordingly.

In fact, SiriusXM—back in February—managed to figure out a way to track users across its stable of apps, including Pandora and Stitcher. That’s going to help improve its case to advertisers and make advertising buys on the platform that much more attractive.

With a growing library of content, SiriusXM can more actively appeal to not only advertisers but also to users. That makes the subscription fees potentially something kept on even during a recession. Entertainment budgets inevitably take a hit as you can’t eat fun. Nonetheless, a life spent too long without fun is also a lot less worthwhile.

With Stitcher, a podcast app SiriusXM bought for $325 million back in 2020, providing extra muscle, podcasts are coming back into their own as an audio alternative to streaming video.

That gives them a few more use cases as well. Watching a video while driving is unconscionable and often illegal. Listening to a podcast, however, is perfectly viable. So too is listening to an audiobook or even music.

Since SiriusXM can offer all of these, it can better access the growing number of use cases and benefit accordingly. I personally managed to get through most of Charles Dickens’s work from a long summer on the lawnmower, thanks to audiobook versions.

That doesn’t count all the people listening in while exercising or the like. All of those ears mean direct benefit for SiriusXM.

Concluding Views

SiriusXM will undoubtedly be hit by an upcoming recession. The surging inflation numbers will likely cut into that market as well. However, we’re talking about a company with growing numbers of use cases, a rapidly improving value to consumers and advertisers alike, and a share price that’s currently under even the lowest targets.

Add all those points together, and you get a profile worth considering more carefully. I’m bullish on SiriusXM. The company took steps to survive a downturn. Its share price is attractive as well. Clearly, it’s ready for more investors to help drive it forward.

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