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Sirius XM: Buy It and Plan on Huge Gain, Analyst Says

The Exchange

Sirius XM Radio (SIRI) is worth a lot more than it's currently trading for, if a very upbeat research call on the satellite radio provider Tuesday is accurate.

The stock, a consistently heavily traded name that has for years had both defenders and attackers about as passionate as you'll find, was recently up 7 cents to $2.64, matching its 52-week high. But if Bank of America Merrill Lynch is correct in its assessment, the stock's got some 46% higher to go from here to $3.75. Not surprisingly, that positive outlook earned it a buy rating from the bank, which was initiating coverage.

It's already had a giant run since 2009, the year Liberty Media (LMCA) invested a big chunk in the company that had been left for dead by doubters worried about its debt load (Sirius XM still has about $3 billion on that front). If you'd bought it at a dime a share then, you're up 26 times on your money.

The BofA Merrill target is well above the current high analyst call, according to FactSet data. At the moment, the top price target is $3.35, and the average of all those following the stock is $2.75, a full dollar below what BofA sees coming.

Sirius XM Radio Stock Chart

While Liberty has been buying shares of Sirius XM and plans to soon have more than 50% of the company formed by the merger of Sirius Satellite Radio and XM Radio and known for its show hosts like Howard Stern, fundamentals have in many cases been improving, too. For instance, sales have risen from $600-plus million in 2006 to past $3 billion, it's gone from losses to profits on the bottom line in that time and EBITDA has turned positive since the days it was talked down regularly by the pessimists.

That's something BofA Merrill points out, noting, for example, that growth is expected to be strong into 2016 for free cash flow and EBITDA.

Should it actually reach $3.75, Sirius XM would be in territory it hasn't seen since late 2007.