A general market downturn and increasing negative press pushed shares of SiriusXM Satellite Radio (SIRI) to a low of $1.27 barely two weeks ago, but the drop was short lived and SiriusXM's stock rebounded to close at $1.80 this past Friday.
Encouraging news developments and growing hype surrounding the pending 2.0 launch fueled the rebound and renewed some investor interest that might have been waning.
Earlier this month SiriusXM announced that Nissan (NSANY.PK) and Infiniti dealers will offer customers of previously-owned vehicles a three month subscription to its satellite radio service, giving SIRI a further foothold into the used car market. GM (GM) announced a similar deal earlier in the year, boosting the satellite radio 'trial subscription' presence in the used car market.
For years SIriusXM has boosted its subscriber growth based chiefly on its ability to convert trial customers from new car sales into permanent ones, since SIRI has trial service deals with just about every major new car sales outlet out there. The recent push into the used car market is a logical next step that helps to ward off attacks from gadgets such as the iPod and services such as Pandora and terrestrial radio, who otherwise might not be willing to give satellite radio a shot.
It also guarantees that SiriusXM may be able to weather another economic storm if a double dip recession materializes, as many predict. While new car sales tend to slump in sagging economies, consumers often opt for the less expensive option of picking up a used car. So potential customers will be tuning in, even if new car sales slump again.
In addition to the significant Nissan announcement, SiriusXM is set to launch its 2.0 platform in the coming quarter. Hype from the pending launch has riled SIRI's loyal retail investor base who see the next generation as worthy of beating down resistance from SiriusXM competitors, but it's also brought out the naysayers who consider the launch a shot-in-the-dark that is not worth the investment in technology.
The 2.0 platform, dubbed "Lynx" could usher in the next generation of satellite radio, as the service will be more readily competitive on the retail market outside of vehicle entertainment and streaming internet market. Lynx will have the common capabilities of today's gadgets, such as touch screen, Bluetooth and Wifi, while also offering additional channels than what's currently available.
Portability into the home and office will also be emphasized with 2.0. While many of today's satellite radio receivers already come with home-docking capability, easing this process will enhance the company's ability to directly compete with the still-growing competition.
It's a crowded entertainment market that SiriusXM still has to compete with, and the volatile stock price shows that. This company brings in more believers and non-believers than most since its success is mainly based on consumer sentiment and/or preference towards particular products and services. The pending 2.0 launch has again surrounded the company with attention and hype, although not to the scale that the Howard Stern signing did years ago. The brief dip back to the $1.20s on heavy volume shows that many out there are ready to take their positions before the next stage of SiriusXM's development takes place.
That "next stage" still involves debt repayment, a possible reverse stock split, and heavy competition on the market, but the company's ability to meet that competition head-on will determine its ability to continue rebounding.
The content offered by SiriusXM, in my opinion, is the key that will cement satellite radio's presence in the marketplace and keep this company growing.
In the present day, there's no where else that a consumer can go for the package of sports, music and entertainment offered by SiriusXM, and as long as that remains the case, then this company can keep growing.
Of course, that doesn't mean that the volatility is going anywhere - SIRI stock has a potent following on both the long and short side, and the battles will continue.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.