Friday, December 6, 2013

Will Sirius XM survive?

Almost 5 years ago, in December 2008, I wrote an article about my stock pick for the new year (2009); Sirius Satellite Radio (SIRI), back then trading for merely $0.14 a share. It was the best call on a stock that I've ever made in my trading career (over a 2535% increase!!). The stock is now trading at about $3.69 a share at this time of writing, and it peaked as high as a little over $4 not that long ago, which would have been even more of an increase had you bought it at the low price of $0.14 a share.

But what does the future hold regarding to Sirius XM radio? To analyze what's in store for the future of company we need to see where it's currently standing in the market and what the prospects are, and as I see it, Sirius XM radio is in big trouble! (To say it in a nice way) It is absolutely plagued by the competition, especially free radio services that are widely available on the increasingly popular mobile devices. And there is a lot of competition that's for sure! Think of Pandora, and even subscription services such as Rhapsody, and yet another music service set to launch next month called Beats Music. There are dozens of (sometimes free) alternatives! How about the free 'TuneIn' radio app, which lets you listen to thousands of radio stations around the world, and to local stations in the US. The list goes on and on. What does this all mean for Sirius XM radio?

The truth is that Sirius XM radio has never been a strong stock really, its all time high peaked at a little over $4 a month or so ago, and this was probably mainly caused by the recent bull rally on Wall Street. The company always had to deal with a lot of competition, before the merger with XM radio it battled with 'satellite radio' and free AM/FM radio, now after the merger it's battling with internet radio.

Howard Stern

I think Howard Stern made this company what it is today, but contracts end eventually. Howard's contract will end at the end of 2015. Given the fact that many people are only signed up for Sirius XM because of Howard Stern, does definitely not secure the future of the company in the long term. Bad outlook.

Good time to short?

Looking at the 52 week range ($2.68 - $4.18) it may be a very good time to short this company. Like I said before, the competition is only increasing and becoming more aggressive, and soon 'just Howard Stern' is not going to be sufficient enough. Though earnings are still some time away (3rd of Feb), it shows that the stocks went into a huge sell off as soon as it went beyond $4 a share, meaning that the market simply doesn't think this company is worth anything over 4 bucks per share. This says a lot about a company I think, and maybe the time to go short is now, anything over $3.50 is probably too overvalued at this point.

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