3 Reasons Sirius XM Holdings Inc. (SIRI) Stock Is As Solid As Ever

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Since its IPO in 2013, satellite radio provider Sirius XM Holdings Inc. (NASDAQ:SIRI) has had a bumpy ride. Worries about whether satellite radio would continue to capture the public’s interest as connected cars develop have been an anchor for the SIRI stock price. However, Sirius XM has proven resilient over the last few years and the company’s future growth prospects don’t look too shabby.

Sirius

Sure, SIRI stock isn’t going to be a high growth engine, but at under $10 per share, it makes for a cheap buy that is likely to continue rising in the coming year.

Here’s a look at three reasons traders shouldn’t bet against Sirius XM stock.

SIRI Stock: It’s Not As Bad As It Looks

One of the biggest reasons traders are betting against SIRI stock is the growing amount of technology that can be found in automobiles. Sirius XM is a popular addition to automobiles, so the idea is that with connected cars offering more ways for users to connect their own streaming services via their smartphone or tablet, satellite radio systems will become obsolete.

While this may be true in say, a decade, there are still plenty of cars on the road without that kind of technology, and for that matter plenty of connected cars with owners that don’t completely understand, or aren’t willing to use all of the features their car is offering. SIRI gives people who don’t want or can’t afford a connected car an entertainment option, and that is still a reasonably large market.

Not only that, but Sirius XM stock doesn’t look bad when you examine its financials either. The company’s most recent earnings report showed that management is expecting to generate around $1.5 billion in free cash flow this year. That means the firm will likely continue to return that money to shareholders through buybacks and it gives the firm more potential to make strategic acquisitions.

Sirius XM Acquisition Rumors

Speaking of acquisitions, SIRI stock has the potential to gain significantly in the New Year if rumors about a potential acquisition of Pandora Media Inc (NYSE:P) are true. Pandora struggled as the music streaming space became more crowded, but the firm is ripe for a takeover. If the two companies were to join forces, it could be a big bump for Sirius XM as Pandora’s $1.4 billion worth of revenue and the firm’s advertising partnerships could be valuable additions to the SIRI family.

While no concrete deal is in place just yet, it’s not unlikely that Pandora would entertain a takeover offer as the company is struggling to grow beyond advertising revenue and gain new subscribers.

SIRI Is More Than Just Satellite Radio

The fact that Sirius XM is peddling a subscription-based radio when people can already get music and radio stations free or nearly free is one of the major reasons SIRI stock has failed to take-off.

However, it’s important to note that Sirius is doing more than selling ice cubes to Eskimos — the company is offering a premium product that people are willing to pay for. Sirius XM provides cultivated stations dedicated to specific types of music, but it’s more than that — the firm also offers one-of-a-kind content with celebs like Howard Stern, making their programs available only on Sirius.

The Bottom Line

SIRI stock is unlikely to deliver massive returns in the coming year, but the company is also not a lost cause. While it’s true that satellite radio will face headwinds in the coming years as technology continues to advance, Sirius XM has proven that people care about its content and are willing to pay for it. Not only that, but SIRI has the potential to use its substantial cash flow in order to make strategic acquisitions and return value to shareholders.

As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.

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Marie Brodbeck has a Finance degree from Duquesne University and has been a financial journalist for more than a decade. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.


Article printed from InvestorPlace Media, https://investorplace.com/2016/12/3-reasons-sirius-xm-holdings-inc-siri-stock-solid/.

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