It's a new era in the media industry. The line between what we know as a "media company" and "tech company" have begun to overlap. The conversation is now at the point where analysts can't tell the difference. And all of this bodes well for Satellite radio provider Sirius XM (NASDAQ:SIRI), which reports first-quarter earnings results Tuesday before the opening bell.
For years, Sirius's perceived value has been tied to the perception that it is a "slow-moving" media dinosaur. Accordingly, its P/E of 50 is often compared to the likes of Time Warner (NYSE:TWX) (P/E of 20) or DirecTV (NASDAQ:DTV) (P/E of 16). That is to say, SIRI stock is too expensive.
But this is no longer 1995 or even 2010. Mel Karmazin's era of running Sirius into the ground with near-sighted solutions is over. Sirius - by its success and thriving business model - is now a likely takeout candidate for Apple (NASDAQ:AAPL), which is looking to gain ground not only in the automobile but also in original content. Dare I say, Sirius can make Beats sound better in the car.
Sure, the word "radio" - an antiquated media term - remains on the company's letterhead. Sirius - by the changing of the market's perception about media - is being measured more closely today to the new age of media/tech than the old. And for SIRI stock, this is going to have an appreciable effect in the quarters ahead. $5 per share for SIRI stock is a matter of "when" not "if."
Why does any of this matter?
Netflix (NASDAQ:NFLX) is just as much of a technology company as it is media. Disagree? Take it up with its CEO, who's made this statement on more than one occasion. Original content, however, is what has made Netflix the king of streaming. "House of Cards," "Orange is the New Black," and now "Daredevil" prove that the old cliche "cash is king" is meaningless. Instead, content is the new king.
And good luck defining what category Amazon (NASDAQ:AMZN) belongs in - is it retail, tech or media? Here's a hint, Amazon also streams movies and has award-winning original content. Ever heard of "Transparent?"
Apple, meanwhile, has long been associated with music and movies just as much as it is known for software and hardware devices. And in the fall, television is expected to be part of Apple's platform. But Apple's television ambitions are not likely to impress unless Apple dabbles in some form of original content. That's what Netflix's results suggest and it's why Amazon is going to Hollywood, looking for ways to grow its library of original content.
For Sirius XM, this all proves why it's model of original programming is now invaluable. No longer does it matter whether Sirius is better than Pandora (NYSE:P) or Spotify or ... fill in the blank. Sirius's original content will continue to give it an edge over competitors that merely broadcast/play what's already available on any other platform.
Plus, that Sirius - by its connected car capabilities with Agero - continues to push further into the tech realm, gives it an additional edge where neither Pandora or Spotify can compete. The car is the next new frontier, according to Apple. But the car is not "new" for Sirius, which already has more than 27 million subscribers. Not to mention, its self-pay subscribers are signing up at more than 20% each quarter. Apple can't ignore this.
Why? Because Sirius's original content has had a lot to do with its growth. This means if the auto is indeed a new frontier for Apple, it's tough to see how Sirius, then, is not a takeout target - if not for Apple, certainly by one of Apple's competitors like Google (NASDAQ:GOOG) (NASDAQ:GOOGL) or Microsoft (NASDAQ:MSFT) that's looking to play defense.
In short, Sirius has taken everyone's best shot and lives to tell about it. With M&A having become the new strategy in media/tech, it's only a matter of time before Sirius' advantage in original content and in the auto becomes a "must-have" for any company looking to gain an edge in this new era of media.
Disclosure: The author is long AAPL.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
