A little due disclosure before we begin; I was a Sirius XM (NASDAQ:SIRI) subscriber for a while, and for the most part, I enjoyed it. It was great having all those options for listening in the car, and that micro-curated approach pretty much ensured that whatever mood I was in, something would be on hand. Sirius XM recently took steps to ensure its own fortunes going forward, inking a new deal with Howard Stern, one of its biggest intellectual properties.
A Monster Deal With Radio's Last Word in Shock Jock
Howard Stern has been a part of the radio landscape about as long as Rush Limbaugh has, and if you're familiar with Rush Limbaugh, you know what kind of longevity that represents. Stern's long-term operations and resultant massive fan base have proven to be valuable for Sirius XM, sufficiently so that Sirius XM offered Stern a fresh contract worth a hefty purse of $120 million per year.
This is an upward trajectory for Stern, who had previously been seen signing multi-year agreements worth $80 million to $100 million per year. If it seems a bit excessive, that's a sentiment not shared by Sirius XM's CEO, Jim Meyer. Meyer recently noted while at a Goldman Sachs conference that he was willing to look any investor in the eye and say that Howard Stern, even at these prices, was a good investment for Sirius XM.
More Than Just Howard Stern
While some might indeed require just such assurance from the CEO, Sirius XM isn't counting on Howard Stern in isolation to drive its fortunes forward. New reports note that the company has made expanded inroads with General Motors (NYSE:GM), setting up an arrangement between the two that's poised to last until 2027.
The new arrangement between the two calls for GM to add Sirius XM functionality to virtually every breed of Buick, Cadillac, Chevrolet and GMC vehicle the company releases, starting with anything in a 2021 model year. The arrangement goes all the way back to 2002, when GM was adding right out of the factory door Sirius XM functionality to its Cadillac line. Now, the arrangement only expands, and GM customers will get free three-month trial offers of Sirius XM for some time to come.
Great news by itself, but Sirius XM also put some punch in the deal for investors. The company boosted its cash dividend for shareholders, bringing it up to $0.014641. That may seem insignificant, but there are two points to keep in mind: one, it's paid quarterly, and two, it's an increase of 10% over last quarter's dividend. The dividend is set to be paid to current shareholders of record on November 6, 2020, with a payable date of November 30.
Not All Sunshine and Dividends
Despite these moves, Sirius XM hasn't exactly been on an upward trend. A look at the company's one-year graph shows familiar results; a plateau around the $7 mark, a careening crash in March / April that took about a third of the company's value with it, a spotty recovery and now a share price hovering back around where it was this time last year.
A few key points would certainly help matters. For one, the company needs to gain ground in the auto sector, which has been on the decline since the coronavirus response effectively locked us in our own homes. Sure, Sirius XM had a fine response with its mobile app, but people turning to radio for entertainment at home is a fairly slim populace. Improvements from its Pandora arm wouldn't hurt either, and if the company could improve its guidance, that would certainly let investors know the company was back in full force.
Our latest research, meanwhile, suggests that's already the case. The company has a consensus “buy” rating on it right now, and a buy that's been trending up for the last 90 days. Just to track it, 90 days ago, the company had one “sell” rating, four “hold” and seven “buy.” Fast forward to today, and that sits at one “sell”, two “hold” and 10 “buy.” Consensus price target is wavering a bit, down from $7.13 30 days ago to $7.06 today, but with Credit Suisse upgrading its rating from “neutral” to “outperform” just yesterday on the strength of “surprisingly” better results than expected, that's a good sign.
With people starting to get back to normal—assuming governments aren't actively impeding such plans—returns to normalcy in driving, fuel consumption, and even satellite radio like Sirius XM may be in the cards. Sirius XM's aggressive marketing campaigns—I've personally received regular mailings asking me to resubscribe since canceling—certainly don't hurt matters, and there's a lot of reason to be optimistic about this company going forward.
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