With shares in the high $5 range, now may be a good time to purchase Sirius XM stock. A key Wall Street analyst just set a new target price of $7.50, and says the satellite radio operator is navigating the economy much better than expected.
The positive report on Sirius XM comes from Jeffrey Wlodarczak, a Principal and Entertainment/Interactive Subscription Services Analyst for Pivotal Research Group.
According to the Pivotal analyst, Sirius reported a much better than expected Q2 result and provided updated 2020 guidance that suggests the company is weathering COVID-19 economic weakness significantly better than expected.
“Post these results we raised our admittedly conservative forecasts which drove a $1 increase in our year-end 2020 target price from $6.50 to $7.50,” Wlodarczak says.
Highlights from the second quarter include self-pay net additions of 264,000 vs. his estimate of a 148,000 loss. There is also higher than expected subscriber ARPU, which despite worse than expected advertising declines drove 1% year-over-year ARPU growth.
Then, there is Sirius XM’s “much better than expected” EBITDA results (flat year-over-year) at $618 million, versus Pivotal’s $603 million consensus.
“Post results we raised our conservative 2020 and beyond subscriber expectations materially, which was the primary driver of the increase in our year-end 2020 target price, based on a DCF valuation methodology (13X ’25 EBITDA, 9% discount rate),” he said.
Sirius XM’s $4.44 COVID-19 impacted year-to-date low came in late March, and shares have largely stabilized since May. And, the $7.25 range was largely seen prior to the COVID-19 pandemic’s arrival in mid-March.
Sirius XM shares go ex-dividend on August 6.