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Sirius XM Radio Inc (SIRI) is Getting Serious About Its Stock

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Sirius XM Radio Inc (NASDAQ:SIRI)’s stock has risen by 85.5% in the last 12 months and 31% since December of 2012, which is when Sirius announced its stock buyback program. Whether or not the buyback program has anything to do with its recent run-up in price, the particular characteristics of the company make the program very interesting for retail investors in the future.

Sirius XM Radio Inc (NASDAQ:SIRI)

Sirius`s Ownership Structure

Sirius XM Radio Inc (NASDAQ:SIRI) is in the broadcasting business. It broadcasts all types of news, sports, music, weather and entertainment, much of it over the internet, to paid customers in the U.S., of which there were more than 23 million at the end of 2011. Its market capitalization is $22.3 billion and its P/E is 7. In the first quarter of 2013 its net profit margin was 13.77% and its operating margin was 27.52%, while for 2012 those figures were 102.88% and 21.33%, respectively.

Buyback Program

Sirius XM Radio Inc (NASDAQ:SIRI) announced a buyback program amounting to $2 billion, which, as a percentage of Sirius’s capitalization, is almost 10%. What makes Sirius XM Radio Inc (NASDAQ:SIRI)’ buyback program particularly interesting, though, is its ownership structure. Liberty Media owns half of Sirius, and another 30%, equivalent to $6.5 billion, is owned by institutional investors. That leaves only $4.5 billion available to retail investors.

Competition

CBS Corporation is a mass media company broadcasting a variety of entertainment, news and sports programs, as well as having the most viewed television network in the U.S.

It has a market capitalization of $30 billion and its P/E ratio is 18.4. CBS’ stock price has recovered remarkably well from the lows of $3.88 at the depth of the recession to reach $49.18 at present.  It is certainly in an older, steadier market than Sirius XM Radio Inc (NASDAQ:SIRI) or Netflix, Inc. (NASDAQ:NFLX), and this means less innovation but steady returns.  Since 2009, CBS has had a steady climb in net income each year–it went from $227 million in 2009 to $1,700 million in 2012.  Of course, CBS competes in with Sirius XM Radio Inc (NASDAQ:SIRI) over content and viewers, but the two companies have quite different models–Sirius is proud to have no advertising, whereas CBS is basically an advertising company.

Netflix, Inc. (NASDAQ:NFLX) provides movies and TV shows through an internet subscription. Like Sirius, it follows the no-advertisement and paid content model.  It has a market capitalization of $12.46 billion and a P/E ratio of 532.21. Its net profit margin for the first quarter of 2013 and for 2012 is below 1% and its operating margin for the same periods is below 2%. Its revenue in the 1st quarter 2013 of $1.02 billion is only $154 million greater than 1st quarter 2012 revenue of $0.87 billion, while its profit margins have been barely positive and essentially flat for the past year.
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