Win Sirius XM's Billions

It's been a good week for Sirius XM Radio (NAS: SIRI) .

Barclays Capital analyst James Ratcliffe upgraded shares of the satellite radio provider on Monday. Yesterday, it was ISI Group analyst Vijay Jayant initiating coverage with a bullish rating.

The analysts don't necessarily see eye-to-eye here.

Ratcliffe is merely upgrading the stock to neutral, and raising his price target on the stock to $2.25. Jayant is a bit more bullish, dusting off coverage with a buy rating and an ambitious price tag goal of $2.80.

However, both analysts touched on the same thing in their notes. Ratcliffe and Jayant see Sirius XM buying back a ton of stock over the next few years.

The move makes sense. Satellite radio is a very scalable business, and it's not as if the company needs to set aside big chunks of cash for anything other than refreshing its satellites every few years. Sirius XM is going to be generating a ton of free cash flow along the way, and it may as well use most of it to retire some of its stock.

Ratcliffe sees XM potentially spending $1 billion a year on repurchases. Jayant is more aggressive, suggesting that Sirius XM will repurchase $5 billion worth of its stock between 2013 and 2015.

Why are analysts trying to spend Sirius XM's money? Well, one thing keeping the stock back is that there are roughly 6.5 billion shares outstanding once you account for Liberty Media's (NAS: LMCA) 40% preferred share stake in the company. Many of the most valuable companies in the country don't have that many shares outstanding.

There's also Liberty Media's recent move to beef up its effective stake to 46.2% of Sirius XM to gain de facto control. The move would allow the company to spin off its shares to shareholders in a tax-advantaged manner. This would naturally lead to a glut of shares on the market, and one way to combat a beefy float is to repurchase shares in the open market.

Earmarking billions for buybacks will have an impact. At today's prices, spending $5 billion would be enough to repurchase more than a third of its outstanding shares. Then again, if Sirius XM continues to grow at a healthy clip, its share price will also move higher, and the company will be buying back fewer shares.

Then again, that would probably be a good problem for shareholders to have.

Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.

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The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizcalls them as he sees them. He does not own shares in any of the stocks in this story, except for Liberty Media. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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