The second half of 2013 looks like it will be a bright point for Sirius XM (SIRI). The satellite radio operator that derives the majority of its subscribers from the auto sector released a statement Tuesday morning that it had added a whopping 715,000 net new subscribers in the second quarter of 2013.
NEW YORK, July 9, 2013 /PRNewswire/ -- Sirius XM Radio today announced that it added 715,000 net new subscribers in the second quarter, bringing its total subscribers to more than 25 million. Strong automotive sales helped drive 15% growth in net additions over the second quarter of 2012 and set a post-merger record for quarterly net subscriber additions. The Company also announced that it was raising full-year guidance for total net subscriber additions to 1.5 million from its previous guidance of 1.4 million.
All I have to say is "uh oh" to these guys, and a very big "uh oh" to this guy. Being short Sirius XM at the moment, or being long on nearly a million dollars worth of puts so far out of the money that expire within days is probably a very bad place to be.
It's time for good news.
As I said last week, with Liberty Media's (LMCA) high basis stake in Sirius XM going "long term" over the past weekend, investors should keep their eyes peeled and ears open for good news surrounding the company. As Liberty has a significant number of shares, in the hundreds of millions, it will likely seek to sell back to Sirius XM, the share price may just be uncapped at this point. Of course, Liberty will wish to receive the most for its high basis shares while selling back. A bit of good or even great news like the one just released goes a long way towards facilitating that kick in the pants the share price will need to get moving out of the current range.
While some investors have been getting impatient with the recent share price gyrations, the simple rule I gave out nearly a year ago still holds true. Sirius XM is in a strong and steady uptrend and investors should seek to add to their positions at or near the 50 day moving average. The yellow line in the picture above shows this clearly over the past 200 trading days. The best prices can and will be found at or just below this line on pull backs.
I realize that investors are bombarded with statements of 'buy the dips' on a regular basis, but Sirius XM's stock is a clear example of where this works beautifully. From a technical standpoint? Sirius XM seems ready to break to the upside.
One ... Two ...
Three? Subscribers are coming in way over expectations, Sirius XM appears ready for a break out of its current trading range, and the company should be ready to make its Q2 earnings call within a few weeks. What is there left to look forward to now that some numbers have been pre-announced?
Investors should pay close attention to the current tally on shares which have been repurchased under Sirius XM's current buyback program. Investors will also want to pay close attention to the possibility of this buyback being increased in order to accommodate Liberty's sell-back of its high basis stake.
Coupled with open market purchases, Liberty selling back in tandem effectively doubles the rate of repurchases, and doubles the rate of shrink on shares outstanding. That doubles the rate of returned value to share holders, and as I continue to expect a share price target of near $4.25 at the end of 2013, prices found during the buyback below that point should look very favorable going forward.
The second half of 2013 should handsomely reward patient investors in Sirius XM. Stick to the plan. Buy, hold, and add on dips to the 50 day moving average or below in order to receive the most bang for your buck. Be patient, and when the share price drags for awhile, be content that the company is receiving a good price for shares it is repurchasing. The most recent news of 715,000 additions in only 3 months sets the tone for the rest of the year. A hint of Christmas in July? Why not.