Liberty Media Sirius XM (LSXMK) A Bull Case Thesis

We noticed a bullish thesis on Liberty Media Sirius XM (LSXMK) on ValueInvestorsClub by punchcardtrader. VIC is our preferred site because the ideas there are generally posted by aspiring analysts who tend to think out of the box. We find the ideas presented on the site well-researched and worthy of a serious consideration. Click here for the full article. Below we summarized the LSXMK bullish thesis published in August 2020:

Liberty Media SiriusXM Group (LSXMK) is a wholly-owned subsidiary of  Liberty Media Corporation. The company has stake in five companies namely; Braves, The Formula One Group, iHeartMedia, Live Nation Entertainment, and SirusXM.

The analyst here was emphasizing on the 37% discount to NAV in the Liberty Sirius component as well as the hidden value in the Sirius XM component (SIRI). A favorable tax event or a share buyback campaign could be the catalyst that could potentially unlock the hidden value. The potential upside cited on the day of the original article written was around 58% over the next one to two years.

It is entirely possible to see two birds killed with one stone

The group’s satellite radio company SIRI is a subscription-based business that delivers commercial-free music plus sports, entertainment, comedy, talk shows, news, traffic and weather. SIRI has been on a share buyback binge significantly faster than its free-cash-flow (around $1.7 billion annually) since 2013. The resultant 33% decrease in the outstanding share count has by default increased Liberty’s stake to around 73%. A continued share buyback could increase Liberty’s stake to 80% in 2^nd half of 2021 giving it a favorable tax advantage especially if SIRI starts giving tax-free dividends. Liberty can use these tax-free dividends to buy back its own shares to the tune of 12-14% of outstanding number, assuming the current NAV discount of 37% stays. An anticipated US tax consolidation in 2021 would help company’s stock see the NAV discount narrow. Almost 100% of the company’s NAV is covered by SIRI alone, which is a profitable vertical.

The stock has since risen to around $45.

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