Sirius XM Radio Inc (SIRI): Four Reasons a Bear Should Worry

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Sirius XM Radio Inc (NASDAQ:SIRI) saw its shares trading below $3 for the first time since February last week, but not everybody thinks this is a buying opportunity. Zacks Equity Research knocked down the stock to "underperform" on Thursday.

Sirius XM Radio Inc (SIRI)

There are a few reasons for the downgrade.

Sirius XM Radio Inc (NASDAQ:SIRI)'s 2013 outlook calling for 1.4 million net additions -- and a more encouraging 1.6 million self-pay subscriber additions -- is short of the 2 million net additions and 1.66 million self-pay accounts it tacked on last year.

The stock has run up too high -- up 73% over the past year at the time of the downgrade.

Sirius XM Radio Inc (NASDAQ:SIRI) already has a commanding presence in the U.S. auto market, now facing "growing competition from Pandora Media Inc (NYSE:P) and Spotfy."

Management policy may be uncertain after Sirius XM Radio Inc (NASDAQ:SIRI) "lost the legal battle" as Liberty Media Corp (NASDAQ:LMCA) took majority control of the satellite-radio provider.

Those points add up to a reasonable bearish thesis on the surface, but dig deeper, and they all appear to be flawed.

Bulls fight back Sirius XM Radio Inc (NASDAQ:SIRI)'s guidance was modest back in January, but keep in mind that Sirius XM Radio Inc (NASDAQ:SIRI) was targeting only 1.3 million net subscriber additions for 2012 a year earlier. As the economy firmed up, retention trends improved, and auto sales remained resilient, the media giant jacked up its guidance to 1.5 million, 1.6 million, and 1.8 million, before ultimately arriving at 2 million net additions for all of last year. Downgrading the stock based on its outlook should be done with respect to Sirius XM's recent history of being overly conservative on that front.

As for the stock's rally, has anyone seen Sirius XM's stock run in recent years? Investors bailing on Sirius XM after the stock's 400% surge in 2009 would've missed out on a further 172% pop in 2010. Dumping Sirius XM just because it has had a strong run and is near a fresh 52-week high has been the wrong move in recent years.

When it comes to Sirius XM's presence in the auto market, keep in mind that there are a lot of old cars out there without satellite-radio receivers. As those autos get traded in, there's a good chance that the new car will have a Sirius or XM receiver. There are more than 250 million registered passenger vehicles in this country, and Sirius XM is currently servicing less than 10% of them. There's upside to be had here.

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