Wall Street Bullish on Sirius XM and Symbotic as Market Hits Record Highs
2min read Last week, the Nasdaq, S&P 500, and Dow Jones Industrial Average surged to record highs, adding to a series of historic peaks this year. This sustained rally has led some investors to question whether there is further room for growth.
However, according to major Wall Street institutions, these concerns are unfounded, and the outlook remains bullish. As we approach the year's end, projections for the end of 2025 continue to rise, with analysts from major banks forecasting that the S&P 500 will climb by approximately 10%, aligning closely with historical averages. This comes after two years of returns above historical norms.
In this optimistic environment, some Wall Street analysts have identified two stocks in the Nasdaq that could outpace the market significantly, with potential returns as high as 115%.
The first is Sirius XM Holdings (SIRI.US), which dominates North America's satellite radio service with 34 million paid subscribers. Including its ad-supported Pandora music streaming service, the audience expands to 150 million, offering a vast reach.
The company has faced challenges due to a recent economic slowdown and a complex merger, which have taken a toll. High inflation has pressured consumers, leading some to cancel their SiriusXM subscriptions. Misunderstandings around the company's merger and reverse stock split have further affected performance. These factors contributed to a year-to-date stock decline of 51%, but the situation may not be as dire as it appears.
In Q3, Sirius saw a 4% drop in revenue to $2.17 billion, with a hefty one-time non-cash goodwill impairment charge of $3.36 billion related to Liberty Sirius XM acquisition affecting earnings. Excluding this charge, EPS would be about $1.17, a 43% increase. Paid subscribers increased by 14,000, although promotional subscribers fell by 114,000 as automakers shifted to shorter trials.
Some believe the sell-off has been excessive. Analyst Matthew Harrigan maintains a "buy" rating for Sirius XM with a price target of $43, implying a potential 53% upside. He notes investor disconnect regarding the merger and highlights strategic initiatives by management as influential.
Additionally, the lower stock price presents an attractive opportunity for savvy investors like Warren Buffett, who has been buying shares. Analysts argue that the current valuation, around 8 times earnings, undervalues future growth opportunities. With steady economic improvement, subscriber churn should slow and growth should gradually resume, potentially boosting Sirius XM's share price.
Symbotic (SYM.US) is another standout. As online retail grows, warehouse automation has thrived, and Symbotic's AI solutions optimize warehouse space by handling individual crates and pallets with advanced algorithms.
Symbotic systems enhance efficiency, reduce labor costs, and slash operational expenses, quickly recouping initial investments. Each module can cover several times its cost over its lifetime, saving tens of millions.
Reflecting this, Symbotic's Q4 2024 revenue grew 47% YoY to $577 million, with a turnaround to an EPS of $0.05. After restating financials due to seasonal variances, reported without further changes, the last threat to the stock has been dispelled.
Following the earnings report, analyst Derek Soderberg reaffirmed a "buy" rating with a $60 target price, suggesting a potential 114% upside. This outlook is bolstered by a recent international expansion deal with Walmex and a warehousing-as-a-service joint venture.
Like many high-growth early-stage stocks, Symbotic carries risks, so position sizes should be carefully considered. Yet, after a recent pullback, with a price-to-sales ratio of 1.5 times, analysts view it attractively priced for a leader in an AI-driven industry.
