Now at Liberty, Sirius Is Dogged by Questions

NEW YORK ( TheStreet) -- Investors are rejoicing that Liberty Media ( LMCA) is no longer interested in buying the remaining portions of Sirius XM ( SIRI) it doesn't already own. Sirius closed Friday at $3.44, up over 2% from Thursday's close of $3.37 although down 1.4% for the year to date.

Investors, including consumer advocate and one-time presidential candidate Ralph Nader, believed they were being lowballed on the price offered by Chairman John Malone, whose Liberty Media has a 53% stake in the satellite radio company. Malone offered $3.68 a share in January to buy out the rest of the company.

With Liberty out of the picture for now, Sirius didn't waste any time taking control of the story. The company said it's resuming its $2 billion share repurchase program, which was put on hold pending a resolution to Liberty's offer. The company also reaffirmed its guidance for 2014.

Aside from projecting 1.25 million in net subscriber additions of 1.25 million, management held firm to its revenue target of over $4 billion. The key metrics in the equations, however, is Sirius projected free cash flow of $1.1 billion. The strong cash flow, in my opinion, was the main driver of Liberty's bid. What's more, it is this cash flow that will fuel Sirius' ability to resume its share buyback program.

Meanwhile, John Malone has shifted gears and is looking to spin off Liberty into dual tracking stocks. Reports suggest a new Liberty Broadband tracker will include various entities, including prior positions in Time Warner Cable (TWC) and Charter Communication (CHTR), in which it owns roughly a 25% stake.

It's not yet clear what Liberty's future intentions will mean for Sirius. But the company hasn't completely closed the door on revisiting the idea of full ownership. What is clear, however, is that investors and analysts are pleased with this outcome.

One in particular is Jessica Reif Cohen, analyst at Bank of America. On Friday, Cohen issued a buy rating on the stock and placed a price target of $5. From Friday's close of $3.44, this represents a 45% premium, which makes Sirius significantly undervalued.

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