Sirius XM Radio Inc (SIRI): Should You Still Invest?

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I generally try to keep myself restricted to analyzing only the financial narratives of a company, but in this case it’s worth mentioning the competitive landscape in which Sirius finds itself.  As noted above, Sirius XM Radio Inc (NASDAQ:SIRI) is already losing some ground against its closest competitors, though it’s still outperforming them.  The question is, then, for how long?  With up-and-coming competitors like Spotify (a personal favorite of mine) and various other internet-based radio/music companies entering the marketplace and offering lower cost and sometimes even free services, I’m interested to see how Sirius responds.  In my opinion, Sirius XM Radio Inc (NASDAQ:SIRI) has to fight an uphill battle against the influx of new competitors offering free and low cost music/radio services, when its bread and butter is a subscription-based model (roughly 87% of Sirius’ total revenue was subscription-based in its most recent 10-K).
Does Sirius have the capital and market experience to get and stay a step ahead of their competitors, new and old?  Sure they do.  The financial numbers displayed above are telling of such, despite the fact that they’ve fallen somewhat since my last post.  However, given the expensive price of Sirius XM Radio Inc (NASDAQ:SIRI)’s stock as represented by its P/FCF currently, it’s not worth a buy.  In my opinion, you’re paying too high of a price for a company with too much risk, in a highly competitive market.  They will undoubtedly be worth considering once their P/FCF comes down a bit and they prove themselves amidst the up-and-coming competition.  But until then, the Sirius Story deserves no spot on your investment bookshelf.

The article Is the Sirius Story Still a Good One? originally appeared on Fool.com and is written by Matthew McMichen.

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