Sirius Satellite Radio is Seriously Undervalued

| About: Sirius XM (SIRI)

Sirius' (NASDAQ:SIRI) stock price started last week with at a fast sprint and traded as high as $3.08 in pre market Monday on news of the FCC getting behind the merger, but tripped and fell by week's end and closed at $1.99 a share after Goldman reiterated its sell rating.  Although selling pressure ensued after the Goldman rating, I believe Goldman will regret its call much like it did with its financial sector call.

As reported late Monday June 23rd, Goldman Sachs & Co strategists urged U.S. stock investors to "underweight" the nation's financial and consumer discretionary sectors, admitting that it was mistaken when it upgraded both sectors just seven weeks earlier. 

In fact, Goldman stands alone with its sell rating on Sirius. Monday, June 23rd, after the close,’s Patrick Schultz said on video interview "Goldman analyst is wrong about Sirius.” Mr. Schultz, like most other analysts, sees great reward and low risk at the current price.   Last week's June 17th Draft Order indicated that the merger approval is days or even hours away, as reported by Forbes. Furthermore, Forbes indicates that Siruis “…has continued to add customers at a hefty clip while bringing costs down.”   16 Analysts currently follow Sirius, and the majority of them have BUY ratings, much in conflict with Goldman. In fact, analyst Tom Watts at Cowen was very pointed in his disagreement with Goldman’s analyst, Wienkes

“We disagree with competitor’s negative view,” noted Watts . He also stated that investors could “expect a rebound.”  Watts cited several factors including: increased OEM installations (penetration rate) that would offset slowing car sales, substantial merger synergies of $5 billion, FCC approval in July, the debt issue being closed not as big a hurdle as some anticipate, and the arb spread to begin to narrow again as anticipated merger closure draws near.

At the current price, I don’t believe one can go wrong with Sirius, unless you are Goldman or you are short the stock. The upside is well above $3.00 while the downside is extremely limited.

Buy low, sell high.

Disclosure: Author holds a long position in SIRI