Sirius XM Expectation Remain Too High

Sirius XM Expectation Remain Too High

There’s a saying, “be careful what you wish for; you just might get it.”

Back in January, Liberty Media ($LMCA) chairman John Malone offered 0.076 shares of Liberty for each outstanding share of Sirius XM ($SIRI) that Liberty didn’t already own. With a 53% stake, Liberty currently owns a majority of Sirius.

At the time, Malone’s offer valued Sirius’ shares at $3.68. Investors argued that it was a “lowball” offer. Investors held out for a sweeter deal. Malone didn’t negotiate upward. Instead, he backed out of a deal and is now looking to spin off Liberty into dual tracking stocks to include various entities, such as prior positions in Time Warner Cable ($TWC) and Charter Communication ($CHTR).

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Since all of this unfolded, Sirius stock has been under pressure. Shares closed Friday at $3.20, down 2.4%, and the stock is down 8% year to date. This has happened even though an analyst at Maxim came to the company’s defense last Thursday, saying that Sirius’ fundamentals remain on track.

Maxim has a buy rating on the stock with a $5.80 price target. From Friday’s close, this target suggests a premium of 81%. Jessica Reif Cohen, analyst at Bank of America, also has a buy rating on the stock with a $5 price target. From Friday’s closing price of $3.20, this target calls for a 56% premium above current value.

This now brings the total to four analysts who have come to Sirius’ defense. Combined, these analysts have an average price target of almost $5 per share. The market doesn’t think the stock can get there. So what are these analysts seeing that the rest of the market is not?

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