After common shareholders breathed a sigh of relief with the Liberty Media bailout, the next question of course is what might be next for satellite radio. As usual, it is anyone's guess, but I will give you some short term and long term food for thought.
For the short term, SIRI will probably be in a holding pattern. If everyone is waiting for a huge break out, it is unlikely to happen even after the next earnings report coming up, although the SIRI stock chart does show some interesting things. It seems to be supported nicely by the 21 day moving average. After its run up to 40 cents last month it did a nice Fibonacci retracement and now has formed a bear flag which could soon be used as a jump rope if it gets any longer. All of this is nice to look at from a technical standpoint. The chart points up. Great. But the stock's current price is a reflection of Liberty Media's bail out and a slight credit rating increase. Yes, all good signs. But now what? SIRI needs another catalyst and there are fundamentals that still need to play out. The future hinges on what Sirius can do in the near term to reduce their debt as well as compensate for the dreadful state of the auto industry, which is probably two years away from any kind of recovery. After all, Liberty Media is not a money tree.
But I do believe the auto industry will recover, mainly because the used car market is getting out of hand. The auto repair industry is beginning to experience a sea change because everyone is buying used cars instead of new, or simply keeping their current car. In either case, the consumer has decided that repairing their car is better than buying a new one. But guess what? That demand for used cars is driving the prices up until their values will start to bubble out. Believe it, it is already happening. But Sirius needs to find viable sources
now to be able to sustain itself later. I like the the idea of partnering with Apple (
AAPL), which has received criticism for not being a viable enough solution. Why does every analyst want to stem a company's success on one single entity?
Of course, an Apple partnership is not the sole entity that will turn SIRI around, but it is SOMETHING. And a lot of little somethings are the bread and butter of a business model.
Long term is another story. Assuming that Sirius can remain solvent for the next two years, we have a much different ball game. There are a lot of opinions that internet radio will make satellite obsolete and admittedly I was one of them. But it won't happen. When I formed that opinion I was thinking like a tech geek and not like a consumer. If you are tech savvy, you can transform your car into its own hot spot and stream internet radio 24 hours a day. But the general public is not really interested in what adapter to buy to convert their iPod or laptop into a stream source. They want to get in their car, turn on the radio that it came with, and listen to their favorite content with clarity and no buffer issues. Here is a link to a
previous article I wrote about the complications with internet radio for anyone who wants to be bored to death with tech jabber. In a nutshell, internet radio will have its place, but it will not make anything obsolete. The drastic increase in band width that ISPs will be dealing with will send subscription rates higher.
Even now, companies like Sprint (
S) and Verizon (
VZ) that used to have unlimited satellite card access have placed a 5MB cap on the service (which by the way still costs 60.00 per month.) because of the increase in bandwidth demand. In any case, I don't see any single entity - satellite, internet, or iPod - being the sole owner of your media content. They will all have their place, but right now and for the indefinite future, SIRI owns 100% of the car market contract and that is large large large. And maybe someday they will decide to integrate their satellite with the mobile web.
You may find this article to be a little push and pull. It's true. But no one wants to see SIRI succeed more than I do. It is just too good. I couldn't live without my CNBC or Bloomberg radio in the mornings on the way to work. As a consumer, I think satellite radio is here to stay. As an investor, my retention of SIRI shares hinges on a recovery of the auto industry, and I really don't see the stock price going much higher than .75 to 1.00 until that happens. But believe me: if there is one person who hopes I am totally wrong about that price prediction, it is me.
No matter what happens, I will still shell out $12.00 a month for my radio service.
This article has 18 comments:
Sorry,
Clinton
When the street realizes that 2 for 1 satellites is the new wave in satellite radio(all sats sent up from now on will support both XM and Sirius signals), and other contracts that are overpriced expire, then there will be another huge savings factored in. But as usual, those things once closer to fruition, will affect the stock price long before its 100 realized. Once this stock R/S on strength(over .80 cents, there will be little holding it back.)
Normally you are right. Please list for me all the 66 million share a day companies currently trading under .50 cents? Probably wont find any but Sirius. You may find some trading under a penny, but those shares are for garbage sucker companies, where you buy a million shares in one trade for around $100. So if the volume is there, and its in the media, then charts are useful. Once a stock bottoms, charting it again becomes possible. But you are somewhat right, its being manipulated as it is under $1, much easier than if it were over $1. So charting should definately be taken with a grain of salt, but still useful. Charts can only show you what happened, and let you make a best guess to the future, they are no way perfect. In fact, Im sure some charters lose money ever year. But its still a tool, one of many we can use to help us understand whats going on. Another is the SI, the institutional buying reports, and volume. Also big buys watching level 2 can also aid you in understanding the SP's direction. But of course nothing is 100 percent. Were in an uptrend, plain and simple.
Look at the year chart of Sirius. Were on the right side of the trade THIS time. :)
Another thing that was good about this article is the retraction on how internet radio will be the demise of Sirius. As the author states, "people just want to get into the car and turn on the radio that comes with the car". Not too many people are interested in having a setup as described in their car. Another good point was brought up by Brandon Matthews a few days ago about the batteries not having the ability to be a "24 hour Jukebox" which supports the idea that Sirius will not be replaced.
Now I have a question for the great one, Relmor. Will the Nasdaq lift the suspension on its listing requirements, set to expire on the 20th of April, or will it be sending the delisting letters to the more than 300 companies under a dollar?
and...if the delisting letters are sent, when would you think that Sirius would do a RS to get above the dollar?
Thanks for a great article Mr. Lattarulo, it is very refreshing to read something not so dismal about the future of SiriusXM.
Long SiriusXM
I own 1000 shares of SIRI, because I love the product.
I can listen to CNBC or Bloomberg in the AM, punk, Jazz, R&B, and the Oldies any time of the day, Yes I love this penny stock.
Once in a blue moon, you might get lucky and make
some money on your pennies, as an example, check
out GIGM, which I ignored until now.......
Al
www.crunchgear.com/200.../
I have to agree. Using Satellites to deliver entertainment radio to individual subcribers is too late in the game. Our wireless and wireless earth based systems are cheaper and faster. The tie up with apple will work for apple device fans only, and provided they subcribe to 3G data plans. Edge and GPRS networks don't have the bandwidth.
Sirius needs to change their business model and deliver something new to a new audience, it needs to tap the world market, not just the US.
If you should ever want me to put your articles on satwaves.com, just drop me a line!
On Apr 15 08:27 PM devojake wrote:
> Penny stocks are junk. Don't buy penny stocks.
> I own 1000 shares of SIRI, because I love the product.
> I can listen to CNBC or Bloomberg in the AM, punk, Jazz, R&B,
> and the Oldies any time of the day, Yes I love this penny stock.
>
> Once in a blue moon, you might get lucky and make
> some money on your pennies, as an example, check
> out GIGM, which I ignored until now.......
On Apr 16 09:13 AM longandshort wrote:
> SiriusXMs founder says:
> www.crunchgear.com/200.../
>
>
> I have to agree. Using Satellites to deliver entertainment radio
> to individual subcribers is too late in the game. Our wireless and
> wireless earth based systems are cheaper and faster. The tie up with
> apple will work for apple device fans only, and provided they subcribe
> to 3G data plans. Edge and GPRS networks don't have the bandwidth.
>
>
> Sirius needs to change their business model and deliver something
> new to a new audience, it needs to tap the world market, not just
> the US.
Offering broadband, then puts them in the position of being a viable cellular alternative, with Skype on the iPhone/iPod touch, etc. as well as many other media services, such as video distribution & TV.
A partnership with Apple would be very good indeed.
Notice that SIRI has been going down since late 2005?
That is one reason why it was able to get up earlier than Dow Jones and SnP in this current downturn. Time is also a major factor in analyzing stock price performance - not only price. Time consumes so many good and bad news, provides the knowledge and experience for the people involved, and enables either bankcrupcy or recovery with higher probability rather than confusion that short-term knee-jerk reactions usually generates.
Looking at the daily chart, the rally from 0.06 to 0.23 is a typical V shape rally. Then the rally from 0.12 to 0.43 was able to penetrate 0.39 slightly with sharp sell-off when it went below 0.39 since most long-term traders will have to react to that re-entry below 0.39 and will automatically protect themselves no matter what.
What most traders do not know was that the rally from 0.12 to 0.43 was an extended 3rd wave in Elliott Waves analysis Extended 3rd wave is very useful in sustaining the rally and/or overcoming major resistances for the bulls (it works for bears too). Extended 3rd wave runs have more than 90% chance of making a 4th wave and the 5th wave for the usual 1-2-3-4-5 rally. For non-EW practioners, they usually call the 5th as the follow-up rally after an extended rally.
SIRI has now in the process of completing the 4th wave if not already done so. Next target for the 5th is 0.51 with increasingly lower probability of reaching 0.62 which is the usual maximum 5th wave run when the 3rd is already extended. More than 0.62 run up for the 5th can happen due to excessive exuberance. But that type of rally is a two-edged sword - the resulting pullback can be very punitive and dibilitating for the rally's own survival. Hope SIRI don't go over 0.62 on the next rally before the next bigger pullback happens.
Once the 1-2-3-4-5 rally in the daily chart has been set. The pullback after that sequence becomes a high confidence buy for bottom fishers who missed the initial V-bottom and the initial pullback off the V-bottom rally or for those who wanted to wait using time as a guage of success or failure.
SIRI is not out of the woods by a long shot.
A major determining factor for recovery rally is the time consumed during the last sell-off and the time consumed during the attempted recovery rally.
Looking at the monthly chart of SIRI. The last sustained sell-off started in Mar 2008 to Feb 2009 or 12 months starting from $3.89 to $0.05.
SIRI will have high confidence recovery rallies in the years ahead if and when it is able to rally for 12 months or less to $3.89.
Once that has been achieved; the next objective will be the $9.43 handle of 2003 to 2004 bear rally top.
Expect shallow correction if and when $3.89 has been achieved and deep correction if and when $9.43 is achieved.
Good luck to all SIRI steadfast followers.
Their dedication to SIRI was the only reason I bought SIRI closer to the bottom and specially when bankcrupcy news started erupting all over the place.