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

Page 1 of 2

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.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!