Satellite Radio Investing Made Simple 21 comments
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It used to be that Sirius and XM carried conference calls that were injected with one upmanship. So much so that even an announcement of the date of the quarterly call was a cat and mouse game to behold. One counted subscribers one way, the other had differing metrics that went into SAC. One was dominating retail, the other OEM. One touted Gross subscriber numbers, the other net numbers. While the companies were in the same sector, there were always challenges in trying to compare metrics, and the street found itself wondering which SDARS company to put their dollars behind.
Those days are gone. Sirius XM Radio (SIRI) has been born, and from this point forward there will be one way to do things. As time passes this should be helpful to the sector, and should allow for a more stabilized investor base. People now only need to judge whether SDARS will be a success and if they want to be invested in the sector. They no longer need to consider which SDARS company, or even if there is enough room for both. This simplifies the investment decision when looking at satellite radio.
Instead of minutia comparisons of how SAC is counted, everyone will be on the same page. Analysts that favored one company over the other (for whatever reason) can no longer point to the metrics that shine the best light on their sector favorite, while casting aspersions at the other company. Now, analysts will either be for or against the concept of satellite radio.
The merger allows Sirius XM Radio to be viewed as a media company, because that is really the only basis for comparison. Getting to the point where Sirius XM Radio is considered a media company rather than a “tech” play is an important step for satellite radio, and one that is perhaps being underestimated by the street. Media companies are measured on Cash flow, and tend to carry multiples that make valuing them a bit more simplistic.
Understandably, satellite radio is not yet profitable, so using multiples is still not a viable way to determine valuation, but that point is coming, and now is the time that investors, institutions, and the street need to try their best to determine 
whether SDARS is a sector in which they want to invest.
With the stock trading at about $1.50, and Sirius announcing their conference call on Thursday, August 7th, we can rest assured that Mel Karmazin will be addressing the guidance of the merged company in no uncertain terms, and the street perception of SDARS as a long term investment will begin to take shape.
The $1.50 price point has delivered a cover position for shorts, and a foundation for longs. In my opinion, the stock simply can not stay at this point very long, and time will be even more short with the conference call that will represent the birth of a media company.
Thursday, it is not the quarter's numbers that will be the focus as much as the outlook going forward. Comparisons to XM Satellite Radio will have exited stage left, and Mel will speak of comparisons to radio giants, and subscription based businesses that deliver content. This will have everyone looking at SDARS from a new perspective, and drawing comparisons that have not really been addressed before.
Mel Karmazin is no longer under “radio silence”. Those that follow Mel will understand that he is going to set goals, and he will obtain them. Mel will reiterate the $400,000,000 in synergies, and give some detail on how it happens. He will give cash flow guidance, and get there. He will begin to draw the comparisons and the street will grab on. This Thursday is the end of quarterly cat and mouse, and the beginnings of Mel Karmazin’s effort to make Sirius XM Radio the largest media company in the country.
Position - Long SIRI
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Each year, just based on the OEM auto channel alone they'll add about 2 million subs a year each paying roughly $120. That's an additional 1/4 billion of growth per year.
Right now, based on the current 18,000,000 subs they bring in over 2 billion a year and this doesn't factor in any of the growth from the following:
1)
Look for a Music library from the combined entity that dwarfs the itunes selections with minimal additional royalty arrangements. Look for high end tiers that will include 2 or 3 free downloads / month with your subscription. Library will be open to anybody for $.99 / song.
2)
Look for advertising revenues to bump up significantly given the 20 million audience and rising. Also look for 100% penetration, sooner rather than later, as OEM installs increase across the board.
3)
Watch for a clear strategy involving branding and a huge retail push across new hardware for the upcoming holiday season.
4)
This service will soon be re-invigorated on the desktop with new Operating System software.
OEM loaded this software will enhance the capture and delivery of streaming across devices such as the iphone and the new handsets from Nokia and Samsung, extending it's reach over multiple platforms.
5)
Look for this desktop software to include a Pandora like option, relative to the new library, that will be delivered via a streaming format. Structure will either be advertiser sponsored or subscription based.
6)
Be ready for Sirius to challenge Clear Channel, over time, relative to concert promotion and on demand broadcast of concerts nationwide. Both live and recorded. Look for them to include and share revenues with the artists regarding downloads of entire venues.
7)
Watch for expanded video offerings and GPS inclusion in new car installs.
8)
Look for expansion in Western Europe beginning with Britain in 2010 / 2011
IT IS A CASH COW THAT IS ABOUT TO CUT IT'S OPERATING EXPENSE BY JUST UNDER 1/3. IT HAS HUGE AVENUES FOR GROWTH BEYOND THE ALMOST GUARANTEED 10% / YEAR. EACH SUBSCRIBER FLOWS ALMOST COMPLETELY TO THE BOTTOM LINE GIVEN THE NOMINAL COSTS ASSOCIATED WITH HOOKING THEM UP AND DISTRIBUTING THE NETWORK TO A NEW CLIENT. THIS INCREMENTAL REVENUE WILL JUST PILE UP.
IF THERE IS ONE GROWTH STORY LEFT YOU ARE STARING IT RIGHT IN THE FACE! AN ABSOLUTE 10 BAGGER. ESPECIALLY BECAUSE EVERYBODY CURRENTLY DOUBTS IT.
The Blue Dog is finally off the leash, the muzzle comes off Thursday morning, and I expect to hear some pretty loud barking from the head dog!
We all have different reasons for investing in this company (or not). I was one of those who subscribed to Sirius when they hired Howard, although I was a bigger fan of BTLS at the time. After checking out and being blown away by the rest of the service for 6 months, I decided I wanted to own a piece of the company. I still feel the service is unmatched in the industry, and I will continue being a stockholder for as long as I believe "The best radio on radio" lives up to it's slogan, regardless of how hard the competition tries to manipulate the stock price.
As far as Mel Karmazin being CEO goes, he took a shithole like CBS Viacom and made it profitable; and now he's at the reigns of a company with almost limitless potential. His track record alone speaks volumes.
As a Sirius subscriber and stockholder, I for one am not going anywhere. I'll sell my shares when Mel sells his, and not a moment before!
#1 Use Tyler as a contrarian Indicator
or
#2 Make things easier and stay out of trash investments with terrible fundamentals and CEOs who give away 50% of shareholder equity to fund their own ridiculous compensation and to has-beens like Stern.
What does it take for you people to realize you're riding a sinking ship??
Hahahahahahahahahaha..... is what you call a washout. It happens to clean the market of clueless wannabe investors. Once they lose their paper route savings they'll realize you have to be smart to do well investing and they go back to delivering newspapers.
By the way Tyler, I notice as the end approaches for SIRI, you get frantic and post many articles each day. You might try some Xanax.
Take a hike.
On Aug 05 08:55 PM The Real Expert wrote:
> Good God you kids are really insanely stupid that it's hilarious
> lol. Mel bought the stock knowing it would give you kids hope. Whats
> $3M to a guy who has been paid over $100M over the past couple of
> years???????? It's called a PR stunt and apparently it worked since
> you kids are too naive to see what's going on lol. I worked on Wall
> Street and I know these games. The continuous stupidity I see with
> SIRI stock holders is really sad. You people have no business investing.
> It's clear to me that you have the investment mind of rocks.
On Aug 05 08:55 PM The Real Expert wrote:
> Good God you kids are really insanely stupid that it's hilarious
> lol. Mel bought the stock knowing it would give you kids hope. Whats
> $3M to a guy who has been paid over $100M over the past couple of
> years???????? It's called a PR stunt and apparently it worked since
> you kids are too naive to see what's going on lol. I worked on Wall
> Street and I know these games. The continuous stupidity I see with
> SIRI stock holders is really sad. You people have no business investing.
> It's clear to me that you have the investment mind of rocks.