Sirius shares are trading lower this morning, down roughly 1% to $3.12. As of this writing the stock is down has lost 1.2% this week and is down roughly 11% year to date.
I stirred the pot Thursday by suggesting that telecom giant AT&T (NYSE:T), which currently has a $50 billion bid on the table for DirecTV (DTV), should pull its offer and instead, go after Sirius XM. I thought I presented a strong argument, if I should say so myself. Not everyone agreed.
Longtime Fool columnist Rick Munarriz, whom I respect, took issue with the article and published a swift response, appropriately titled "AT&T Isn't Going to Buy Sirius XM." In the article, Munarriz argues:
"I know that the past few months have been disappointing for Sirius shareholders. The stock has shed 23% in value since peaking in October, and it's trading 8% lower year to date. However, is a 10% buyout premium really going to be enough for a stock that has been one of the market's biggest winners over the past five years? Sirius XM shares climbed more than 20% last year after soaring nearly 60% the year before. The company closed out its latest quarter with a record 25.8 million subscribers."
He's absolutely right. The stock has been on a strong run since 2009. But this argument affirms what I continue to see as chronic selective analysis for those that cover this company. It's fine to only go back five years to make your case. But going back even further by an additional five years, Sirius shares are still down 60% from their $7.62 high in 2004.
And expand the horizon 4 years further to when the stock peaked at $61 per share in 2000, Sirius' value is still down 95%. Now raise your hand if you think the stock is ever going to get back to that level. Sure, Sirius stock has done well the past five years, but it also speaks to the depths to which the company had gone. There was no place to go but up. But the question is about the future.
To that end, Munarriz believes Sirius is better left to "operate on its own." But with Liberty Media (NASDAQ:LMCA) owning 53% of the company, there is no such thing. Liberty is being credited has having "saved" Sirius. But John Malone, Liberty's chairman, couldn't care less about saving any company. As he has been known to do, he saw an opportunity and pounced on it. Sirius was wounded and had nowhere else to turn.
Falling auto sales and a depressed economy almost sent Sirius to bankruptcy. The company has been nursed back to health, yes. But guess what; Sirius still has nowhere else to turn. Liberty is calling all of the shots. In the process, they are appeasing retail shareholders by "allowing" Sirius to buyback its stock, which also benefits them. This buys them time before they figure out what Sirius' next move will be.
In that regard, does anyone really believe that Sirius will emerge the victor in the automobile, specifically the connected car revolution? Apple's (NASDAQ:AAPL) CarPlay, which it has launched with 12 auto manufactures, is not scribble written on a wall. The writing is clear for everyone to read. In another Munarriz article, he mentioned how General Motors (NYSE:GM), a Sirius OEM, has essentially become a Sirius competitor. In that article, Munarriz began by saying:
"General Motor is about to throw some serious weight behind the connected car revolution, and Ma Bell is calling shotgun. Starting with the 2015 Chevy Malibu that hits showrooms next month, GM will offer 4G LTE connectivity in 30 different Chevy, Buick, Cadillac, and GMC vehicles."
Later he added:
"This is a pretty big deal. GM will make sure that connected cars become more prolific with the wide rollout. AT&T will make sure that these hotspots get connected with economical plans for drivers that already have ample data to spare every month."
So if I understand this correctly, AT&T has an interest in the connected car. Yet, Munnariz adamantly argues against why AT&T would even consider Sirius XM, which through its Agero acquisition, has established a position in that area. And when you factor Sirius' roughly 26 million subscribers, which transcends across all auto manufactures, not just GM, a deal for Sirius XM makes perfect sense. And it's disappointing that Munarriz, whom I respect, wasn't unable to make this connection within two of his own articles.
Disclosure: I am long AAPL.
Business relationship disclosure: The article has been written by Wall Street Playbook's tech sector analyst. Wall Street Playbook is not receiving compensation for it (other than from Seeking Alpha). Wall Street Playbook has no business relationship with any company whose stock is mentioned in this article.