Could Sirius XM Be a Millionaire-Maker Stock?

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There's still some rocking and rolling with satellite radio. Sirius XM Holdings (NASDAQ: SIRI) is on the verge of becoming one of the few stocks to move higher for the 10th consecutive year, as long as it can cling to its 3.6% year-to-date gain through the last four trading days of 2018. The future remains bright for Sirius XM. The media giant continues to grow in popularity and profitability, and early next year it should close on a potentially game-changing acquisition.

Sirius XM has made investors who took a chance on it during its darkest hour in early 2009 a ton of money. The stock is a 110-bagger since bottoming out at a nickel nearly a decade ago. It won't be another 110-bagger in the next 10 years, but there are still plenty of ways for Sirius XM to be a millionaire maker again.

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Playing a new beat

Sirius XM keeps gaining ground with its premium satellite radio service. There were 33.7 million total subscribers by the end of the third quarter, a gain of more than 1.5 million accounts over the past year. Revenue growth may be slowing -- this will the fourth consecutive year of single-digit percentage growth -- but the scalable model is opening the door to gobs of profitability. Sirius XM is targeting roughly $1.5 billion in free cash flow for all of 2018.

There's no denying that Sirius XM has cornered the market on automaker-installed premium audio entertainment. Even the arrival of the connected car -- something Sirius XM bears once argued would spell the end for satellite radio -- hasn't gotten in the way. Sirius XM has been consistently posting sequential net subscriber growth for years. Every passing month finds more cars on the road with factory-installed satellite radio receivers, making it easier for Sirius XM to grow its reach.

Streaming has been a void in Sirius XM's tool belt, even though the satellite radio provider has been offering online options for nearly a decade. Its pending purchase of Pandora (NYSE: P) should change things. Pandora investors will vote on Jan. 29 to approve the all-stock deal, and it's highly likely to go through. Pandora's board approved a deal to be acquired, exchanging every share for 1.44 shares of Sirius XM.

Both stocks have taken a hit since the proposed pairing was announced. Pandora shares were trading above $9 when the deal was first announced three months ago, and the deal is currently worth just $7.93 at Sirius XM's latest close. However, Pandora can't afford to be cocky. No one else stepped up after Sirius XM made its offer, and the market has slammed valuations across most stocks in recent months.

Pandora and Sirius XM are a perfect match. Sirius XM's 33.7 million satellite radio subscribers and Pandora's 68.8 million active listeners combine for a nine-figure audience of audio content consumers. Sirius XM's ability to get folks to pay up for entertainment will help boost Pandora's premium user base north of its current 10% rate. Pandora will improve Sirius XM's ad-selling prospects as well and fortify its streaming pedigree.

Sirius XM's success in the future will rely largely on how well the Pandora deal pans out, but even if it's measured on its own merit, the satellite radio monopoly will fare well on its own. The platform continues to gain traction, and customers haven't flinched at the gradual price increases over the years. Sirius XM won't see its annual streak of stock gains go on indefinitely, but it's in the right place at the right time to continue delivering market-thumping returns over the long haul.

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Rick Munarriz owns shares of Pandora Media. The Motley Fool owns shares of and recommends Pandora Media. The Motley Fool has a disclosure policy.