Sirius XM Closes In on a New 8-Year High

Source: SiriusXM blog.

Slowly, and perhaps not so quietly,Sirius XM Radio is close to trading at its highest level since early 2007. A strong quarterly report on Tuesday was followed by an analyst upgrade on Wednesday. If the satellite radio provider is able to trade north of $4.18, it would indeed be the highest price that the stock has fetched since Jan. 2007.

Shares of Sirius XM moved 3% higher on Tuesday -- closing at $3.96 -- after posting encouraging quarterly financials. Revenue climbed 8%, to $1.12 billion. Adjusted earnings soared 29%, to $170 million.

That was roughly in line with Wall Street expectations, but then Sirius XM raised the bar by boosting its guidance for the entire year on all four metrics that it provides projections. It now sees stronger gains in 2015 for revenue, subscriber count, adjusted EBITDA, and free cash flow.

Sirius XM's strong report prompted Wunderlich Securities to boost its rating on the shares. Wunderlich Securities had been neutral on the stock since downgrading it to Hold 17 months ago, but it changed its tune on Wednesday morning. It now rates the stock as a Buy, with a price target of $4.60, up from an earlier $4 goal. If the shares do get that high, it would be the highest they have traded since the summer of 2006, making this a nine-year high.

Then again, when we're talking about Sirius XM approaching levels last seen in early 2007 or the middle of 2006, it's also important to remember that this wasn't the same company back then. It was a much smaller company.

It hadn't doubled its share count the way it did in 2008 when it was able to complete its merger with XM Satellite Radio. It hadn't doled out a 40% stake in preferred shares to John Malone's media empire in exchange for the financial lifeline that kept it afloat. So, yes, we may be talking about Sirius XM approaching multi-year highs; but when we're talking about actual market cap and enterprise value, we're approaching all-time highs.

Sirius XM is in a great place. It's now servicing 28.4 million subscribers, up nicely from the 26.3 million accounts under its belt a year earlier. Monthly churn -- the percentage of subscribers who are canceling the service in an average month -- has fallen to a post-merger low of 1.6%.

This doesn't mean that the naysayers have moved on. There were 141.9 million shares of Sirius XM sold short as of mid-July. It may have seen its short interest shaved in half during the past year; but that's still a big number.

It's hard to side with the bears. Sirius XM continues to grow its subscriber count, putting an end to fears that folks don't want to pay for premium radio. Beyond seeing adjusted net margins clock in north of 10% -- something that has now happened for five quarters in a row according toS&P Capital IQdata --we're talking about a unique media giant that can actually control its programming costs, and scale accordingly.

With Sirius XM now targeting a record $1.3 billion in free cash flow, and an appetite for buying back shares and embracing new technologies, it's not a surprise to see Tuesday's monster report convert at least one Wall Street pro to return as a bull.

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