Liberty Sirius XM Group (NASDAQ:LSXMA), or Liberty Media Corporation, holds controlling ownership stakes in the Atlanta Braves baseball team, Sirius XM Satellite Radio (NASDAQ:SIRI), and Formula One Group. It also has minority stakes in Live Nation Entertainment, Drone Racing League, Saavn, and Tastemade.
The company is deeply involved in buying and selling sports and media properties, but as an investment does it make sense; is Liberty Media stock a Buy?
Major League Baseball and its World Series faced enormous challenges when players were routinely removed from play for testing positive for the virus. The lack of morning and afternoon commutes ate away from SiriusXM’s listener base while Walt Disney Co (NYSE:DIS) shut down its Radio Disney stations.
Even F1 experienced delays, smaller crowds, and infections in its racing season. These hits made it hard for the company to recover from the pandemic and could represent a bargain opportunity for those willing to bet on a speedy recovery.
Of course, it faces heavy competition in its quest. Can Liberty Media deliver a home run for investors or will it strike out?
Liberty Media Corporate History Is Complicated
Liberty Media started in 1991 as a spinoff of cable television provider TCI. It initially owned several investments, including Encore and Starz.
Soon, it expanded through a series of deals to at one time own stakes in DirecTV, Game Show Network, FUN Technologies, TruTV (then Court TV), and Charter Communications.
The company acquired the Atlanta Braves and DirecTV through a 2007 asset swap with News Corp and Time Warner. Not long after, it took over 12 million preferred shares of SiriusXM in 2009 and continued raising its stake to a controlling interest of 74.4 percent, as of October 2020.
It even spent $204 million for a 16 percent stake in retail bookstore chain Barnes and Noble.
By 2016, it paid $4.6 billion to acquire Formula One Group, and this created the third major revenue stream in its portfolio. This gave it large minority interests in multiple associated subsidiaries, and it rolled several other investments under the group.
With so much buying and selling going on, investors wonder if the group as a whole is a buy.
Is Liberty Media Stock A Buy?
Liberty Media market capitalization was over $16 billion at the beginning of the year. LSXMA share price fell to a 52-week low of $22.54 during the March lows, before climbing back over $40.00 by year end.
However, it’s still nowhere near its former trading price ceiling of around $50.00, and that is due to the pandemic strangling profits from all three of its business lines.
By the third quarter of 2020, revenue clocked in at $2.02 billion, a one percent year-over-year increase from the same period in 2019. Income from that was $272 million, or $0.06 diluted earnings per share (EPS).
The company did manage to add 169,000 net paid SiriusXM subscribers in the quarter, and it finished its Stitcher acquisition. Its total premium subscribers of 30.9 million exceeded guidance and put investors at ease heading into the new year.
Liberty Media held $3.3 billion in cash and cash equivalents heading into 2021 across its three main groups, SiriusXM, Braves, and Formula One. And the company got its racing season back on track in time to continue earning revenues.
The Braves were on a hot streak that only stopped at the World Series champion Dodgers. Playing in the post league is an instant boost for team revenues, as more TV time means more merchandise sales and more.
Still, it’s in a competitive business that carries a lot of associated pitfalls.
Challenges For Liberty Media Stock Investors
Although Liberty Media has a diversified range of investments, it is in precarious position. The Atlanta Braves, for example, were one of the best teams in a league with declining attendance over the past decade.
Even if they made the World Series, the Braves would have played for a 32 percent smaller audience than the prior year.
Meanwhile, Disney leaving Sirius is just one of many problems it faces. Howard Stern’s salary alone is around $90 million annually for the next five years. And Spotify paid over $100 million to bring Joe Rogan on its services to compete.
That’s just one of the many competitors hoping to eat Liberty Media’s lunch. And this is all assuming that these markets aren’t negatively impacted by the economy recovering over the next five years.
Both Liberty and its rivals could find themselves struggling in the war of the streaming services.
Liberty Media Vs Spotify
Liberty Media has a slew of competitors wherever it operates, and it all depends on how you look at it. As a franchise, the Atlanta Braves value doesn’t even put it in the top 10 of MLB teams. The L.A. Dodgers beat the team in the National League Championship Series, and it also has a market value nearly twice as high.
But other sports leagues are more likely to be considered the Braves’ competition. This is true for F1 too, which competes with NASCAR and other events.
SiriusXM faces stiff competition from Spotify (SPOT), and iHeartMedia and others are just as hungry for their piece of the pie. If Apple and Google had their way, you would only listen to podcasts on their devices (especially since Apple coined the term).
The media landscape is changing, and there’s no telling who will be the next Netflix (NFLX) and who will end up the next Quibi.
Is Liberty Media Stock A Buy? The Bottom Line
Liberty Media is a mass media company with stakes in a diverse range or assets, including sports, radio, and content distribution channels. Its broad range of assets helped it navigate the pandemic with minimal business interruption.
And its Braves had a relatively good season this year.
If it can keep expenses to a minimum while maximizing its subscriptions, licensing, and other revenue deals, the company could perform well over the next decade. Of course, given its track record, there’s no telling which companies it will or won’t own by 2030.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.