With April looming around the corner, I began to reflect on the past month and things that occurred with one of my favorite stocks to write about; SiriusXM (SIRI). Although I played the last month perfectly (a rarity in this business) I still am a bit dumbfounded as to the price heading back as far as it has recently.
As I wrote in the middle of the month, playing the Sirius yo-yo if you owned the stock was the way to go, using covered calls to profit while the stock remains stagnant. The stock had a slight run-up (as predicted) at the beginning of the month, and has come back down to the $2.20 area (as slow as it takes for syrup to run down your finger) over the past few weeks. This is the way the stock has performed over and over again. But a few things are on the horizon that could send this stock catapulting towards the $3 area in the coming months.
So quiet, it is screaming: After the 3/6 date came and went, we did not hear a peep regarding a Liberty (LMCA) takeover of Sirius. In fact, it was way too quiet in my eyes. Very few of us are privy to the inside track, so to me this seemed as if something could be on the horizon. Although Liberty may be the stock to purchase outright and be a better play overall, Sirius still remains as a viable buy (especially in the $2.25 range) as the price would probably jump 15-20% on the news alone of a takeover. I had written this article last night, only to see this morning that the takeover seems to be underway. The price is already up 9 cents (as I edit this article) and climbing on the news of the takeover talk starting up.
Earnings upcoming: Sirius is set to report their earnings in the coming weeks, I expect the news to be overwhelmingly good. Auto sales for both January and February were higher than anticipated and we all know how Mel loves to undercut the numbers with the hopes of being the hero when the reports come in. I expect new subs to be 10% higher than the original projection, even with the increase in price taking effect.
Nothing else has changed: Although this is a simple statement, in reality sometimes no news is good news. The stock needs time to financially better itself (as it has been) over the past few years, and with no bad news (that we know about) on the horizon,I expect the bottom line to improve quarter over quarter. This (should) mean a price increase.
I am staying long on the stock and may even increase my Jan 13 $2.50 call position while the price ($21 an option) is attractive. Make sure you don't miss the bus on this one!
Disclosure: I am long SIRI.