What Happened?
Shares of satellite radio and media company Sirius XM (NASDAQ: SIRI)
jumped 4.9% in the afternoon session after Wells Fargo upgraded the stock to Equal Weight from Underweight, significantly raising its price target. The bank boosted its price target to $30 from $18, citing a major revaluation of the company's spectrum from $1 billion to $5 billion.
Wells Fargo analyst Steven Cahall noted that the firm had missed a "meaningful market revaluation" of the spectrum. The note explained that spectrum valuations "are running hotter," partly because companies like SpaceX are apparently pursuing the U.S. mobile market. The rally pushed the stock to a new 52-week high.
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What Is The Market Telling Us
Sirius XM’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 10.1% on the news that the company reported third-quarter results that surpassed analyst expectations for both revenue and profit.
The satellite radio company reported a GAAP profit of $0.84 per share, a significant turnaround from a loss in the same period last year and 7.9% above consensus estimates. Revenue for the quarter was flat year-on-year at $2.16 billion but still beat forecasts.
Despite a year-on-year decline of 574,000 total subscribers, investors appeared to focus on the improved profitability. A key highlight was the company's free cash flow of $257 million, with the free cash flow margin expanding to 11.9% from just 1.1% in the prior year's quarter.
Sirius XM is up 52.7% since the beginning of the year, and at $31.32 per share, it has set a new 52-week high. Despite the year-to-date gain, investors who bought $1,000 worth of Sirius XM’s shares 5 years ago would now be looking at only $466.80.
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