5 Reasons Why Sirius XM Is Overvalued [View article]
In this case, the term "not growing fast enough" means "not growing fast enough to deal with their debt and shareholder demands".
The current price of $1.90 @ 3.9 billion shares demands quite a bit of profit, which won't occur at the current level and growth of revenue as long as SIRI continues to have large interest payments and capital expenditures.
5 Reasons Why Sirius XM Is Overvalued [View article]
You have some valid points as far as the free cash and the new Satellites. You can't tell me, however, the debt is not a risk. There is a whole host of negative things that could happen to SIRI, most out of their control, and they don't have the equity backstop to stay afloat if they go back into crisis mode.
5 Reasons Why Sirius XM Is Overvalued [View article]
Flawed? No. Simplistic? Yes. Although SIRI and GM's business and debt are nothing alike, the fact remains that GM went under because sales slowed down and they were over leveraged. The same can easily happen to SIRI.
5 Reasons Why Sirius XM Is Overvalued [View article]
Thanks for your rational comments. As a technical trader, I don't fault you for buying this stock. A value investor (I don't trade, I invest) as myself would not touch SIRI with a 10 foot pole (at least not until the share price hits 20 cents where it belongs).
5 Reasons Why Sirius XM Is Overvalued [View article]
Let me know how this goes. SA told me "great article! Just please reference the 10-Ks".
I don't see enough compelling evidence in the 10-K to indicate to me they will not need to construct more satellites. Those forward looking expense statements you pointed out do not match looking at the expenses the company has dealt with in the past to maintain its satellite "fleet".
I am not sure how my lone article on SA will lead to hardship for a company with a market cap of 7.6 billion. Furthermore, SA is not the only place this article exists. Its already been rebroadcast on a few blogs such as this one: financial.businessinsi... It has also been retweeted and shared on linkedin a few times. Finally its on my blog here: blog.forcastix.com/201.../
5 Reasons Why Sirius XM Is Overvalued [View article]
I believe I can answer your claims with this one risk factor outlined in their 2010 10-K on page 18 ======================... "Our substantial indebtedness could adversely affect our operations and could limit our ability to react to changes in the economy or our industry.
As of December 31, 2010, we had an aggregate principal amount of approximately $3.3 billion of indebtedness. Our substantial indebtedness has important consequences. For example, it:
• increases our vulnerability to general adverse economic and industry conditions;
• requires us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, reducing the availability of cash flow to fund capital expenditures, marketing and other general corporate activities;
• limits our ability to borrow additional funds or make capital expenditures;
• limits our flexibility in planning for, or reacting to, changes in our business and the audio entertainment industry; and
• may place us at a competitive disadvantage compared to other competitors.
The instruments governing our indebtedness contain covenants that, among other things, place certain limitations on our ability to incur more debt, pay dividends, make distributions, make investments, repurchase stock, create liens, enter into transactions with affiliates, enter into sale lease-back transactions, merge or consolidate, and transfer or sell assets. Failure to comply with the covenants associated with this debt could result in an event of default, which, if not cured or waived, could cause us to seek the protection of the bankruptcy laws, discontinue operations or seek a purchaser for our business or assets." ======================...
5 Reasons Why Sirius XM Is Overvalued [View article]
Sure...the iPhone was disruptive to the mobile phone market. Google was disruptive to the internet search and advertising market. The PC and MS-DOS/Windows was disruptive to the computing market.
A disruptive technology is a technology that changes the rules of how to be successful in a market. It typically spawns many copy cats who must adopt the technology to remain competitive.
5 Reasons Why Sirius XM Is Overvalued [View article]
I will reply to your comment as it is one of the few well thought out comments.
#1 Debt is a necessary evil of any business. If you have a look at the 10-K, you will see that some of the terms to the debt dictate interest rates as high as 13.5%. This is border line to predatory credit lending rates. SIRI might as well have just gotten a title loan on its satellites. Its also the fact that, although SIRI has increased its subscriber base, its debt has increased. One would assume that debt would be highest early in the company's history and decrease as they profit. For SIRI this is not the case, the story has gotten worse.
#2 Cash is important. There is nothing wrong with share dilution. There is something wrong with watching the price of the stock without factoring dilution, which many SA people seem to do. Technical analysis does not factor dilution, and anyone who buys a stock on the charts is ignoring the dilution. If SIRI needs more cash and issues 5.1 million more shares, the share price will tank and shareholders need to be aware of this.
#3 SIRI clearly states in their 10-K they have 4 satellites falling out of useful service in 2013. These have to be replaced, and it will cost 1.2 billion, which is money SIRI does not have nor will they receive in revenue alone over the next 2 years. 2.0 is internet radio right? Do you know how much money Pandora makes? 20 million in 2009, that's gross Revenue. SIRI will just be entering the market, and Pandora clearly dominates internet radio. Its a small pie, and SIRI will get a small piece of that small pie.
#4 No one knows what subscriber behavior will be after a rate hike. And if the rate hike is modest, it will not give SIRI the profit increases it needs to pay down its debt.
#5 If the recession is so bad, why are companies like Google and Apple making money hand over fist? Ill tell you...very little debt, products with high margins. With the extra cash they can innovate. SIRI does not even have enough cash to keep its Satellites in space without another loan.
All the comments you make about SIRI the stock are correct. A technical trader could see alot of good in owning SIRI. I have watched many on SA talk about getting out and in of SIRI over and over, profiting every time. My purpose of writing the article was to point out that SIRI is not a safe buy and hold right now. I short SIRI because I think there is alot of euphoria around recent price moves and 2.0, and I believe it will all be a big dissapointment, and the shorts will right size the share price.
5 Reasons Why Sirius XM Is Overvalued [View article]
I can't reply to you all so I will make a blanket reply.
I understand that many of you love SIRI. Maybe you own Sirius XM Radio players, and subscribe, and think this is the best thing since color TV!
I think SIRI has a good product. I don't think they will climb out of their debt. That is the foundation of my article. Go read the 10-Ks, I provided links and references. Its all there.
Any doubters, please see GM, a company who sold good products but was hopelessly leveraged.
I agree on your comment about the intangibles. After I wrote my post, I dug deeper in the 10-K. The goodwill is the overpayment for XM (of which 75% has already been written down, a good sign that its not over inflated) and the intangibles are for their FCC licences. I am no expert into what FCC bandwidth is worth, so I would have to trust they have valued it appropriately.
I still stand by the fact that the negative book value is disconcerting. It would be one thing if book value was close to 0 after subtracting intangibles/goodwill, but it is very negative. Couple this with the fact they carry 3 billion in long term debt with 200 million last year coming due, and one quickly sees they have a long ways to go. They have to do a few things right for shareholders to see value:
1. Get the debt down 2. Keep the compitition out (now that they bought XM...whats stopping another company from entering the market to fill the void) 3. Keep subscriber base up (may mean not toying with the price) 4. Do so for 5-10 years in a row.
I see why you may feel this stock is a value. They turned a profit for the first time last year after many years of toiling with losses. They were rescued from the clutches of bankruptcy. It really looks like another Ford in some aspects. But as a value investor, I could not accept the current risk at the current price.
What saddens me the most is that so many retail investors, many who read and comment on SA, do not see beyond opinions and share price. They don't know the basics of valuation, nor do they know what is happening to this stock with dilution. They may get in at 1.80 thinking its a better deal than 2.00, not realizing that SIRI can at any moment dilute their holdings by 60%, bringing the value of their purchase below a dollar.
Its not that this stock will never be a good buy...but its not a good buy at 2. Somewhere under $1, assuming profits continue at the current rate and no new debt happens, could be plausible. But not for me...I don't buy companies that have more years of losses than profits, or which have negative book value after intangibles/goodwill.
5 Reasons Why Sirius XM Is Overvalued [View article]
5 Reasons Why Sirius XM Is Overvalued [View article]
The current price of $1.90 @ 3.9 billion shares demands quite a bit of profit, which won't occur at the current level and growth of revenue as long as SIRI continues to have large interest payments and capital expenditures.
5 Reasons Why Sirius XM Is Overvalued [View article]
5 Reasons Why Sirius XM Is Overvalued [View article]
5 Reasons Why Sirius XM Is Overvalued [View article]
Thanks for pointing this out.
The repostings on the net are not done by me...I'm not sure how this occurs. I corrected the version on my blog (blog.forcastix.com)
5 Reasons Why Sirius XM Is Overvalued [View article]
5 Reasons Why Sirius XM Is Overvalued [View article]
5 Reasons Why Sirius XM Is Overvalued [View article]
I don't see enough compelling evidence in the 10-K to indicate to me they will not need to construct more satellites. Those forward looking expense statements you pointed out do not match looking at the expenses the company has dealt with in the past to maintain its satellite "fleet".
I am not sure how my lone article on SA will lead to hardship for a company with a market cap of 7.6 billion. Furthermore, SA is not the only place this article exists. Its already been rebroadcast on a few blogs such as this one:
financial.businessinsi...
It has also been retweeted and shared on linkedin a few times. Finally its on my blog here:
blog.forcastix.com/201.../
The word is out, there is no reversal.
5 Reasons Why Sirius XM Is Overvalued [View article]
======================...
"Our substantial indebtedness could adversely affect our operations and could limit our ability to react to changes in the economy or our industry.
As of December 31, 2010, we had an aggregate principal amount of approximately $3.3 billion of indebtedness. Our substantial indebtedness has important consequences. For example, it:
• increases our vulnerability to general adverse economic and industry conditions;
• requires us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, reducing the availability of cash flow to fund capital expenditures, marketing and other general corporate activities;
• limits our ability to borrow additional funds or make capital expenditures;
• limits our flexibility in planning for, or reacting to, changes in our business and the audio entertainment industry; and
• may place us at a competitive disadvantage compared to other competitors.
The instruments governing our indebtedness contain covenants that, among other things, place certain limitations on our ability to incur more debt, pay dividends, make distributions, make investments, repurchase stock, create liens, enter into transactions with affiliates, enter into sale lease-back transactions, merge or consolidate, and transfer or sell assets. Failure to comply with the covenants associated with this debt could result in an event of default, which, if not cured or waived, could cause us to seek the protection of the bankruptcy laws, discontinue operations or seek a purchaser for our business or assets."
======================...
My entire argument is in the last sentence.
5 Reasons Why Sirius XM Is Overvalued [View article]
5 Reasons Why Sirius XM Is Overvalued [View article]
Google was disruptive to the internet search and advertising market.
The PC and MS-DOS/Windows was disruptive to the computing market.
A disruptive technology is a technology that changes the rules of how to be successful in a market. It typically spawns many copy cats who must adopt the technology to remain competitive.
5 Reasons Why Sirius XM Is Overvalued [View article]
#1 Debt is a necessary evil of any business. If you have a look at the 10-K, you will see that some of the terms to the debt dictate interest rates as high as 13.5%. This is border line to predatory credit lending rates. SIRI might as well have just gotten a title loan on its satellites. Its also the fact that, although SIRI has increased its subscriber base, its debt has increased. One would assume that debt would be highest early in the company's history and decrease as they profit. For SIRI this is not the case, the story has gotten worse.
#2 Cash is important. There is nothing wrong with share dilution. There is something wrong with watching the price of the stock without factoring dilution, which many SA people seem to do. Technical analysis does not factor dilution, and anyone who buys a stock on the charts is ignoring the dilution. If SIRI needs more cash and issues 5.1 million more shares, the share price will tank and shareholders need to be aware of this.
#3 SIRI clearly states in their 10-K they have 4 satellites falling out of useful service in 2013. These have to be replaced, and it will cost 1.2 billion, which is money SIRI does not have nor will they receive in revenue alone over the next 2 years. 2.0 is internet radio right? Do you know how much money Pandora makes? 20 million in 2009, that's gross Revenue. SIRI will just be entering the market, and Pandora clearly dominates internet radio. Its a small pie, and SIRI will get a small piece of that small pie.
#4 No one knows what subscriber behavior will be after a rate hike. And if the rate hike is modest, it will not give SIRI the profit increases it needs to pay down its debt.
#5 If the recession is so bad, why are companies like Google and Apple making money hand over fist? Ill tell you...very little debt, products with high margins. With the extra cash they can innovate. SIRI does not even have enough cash to keep its Satellites in space without another loan.
All the comments you make about SIRI the stock are correct. A technical trader could see alot of good in owning SIRI. I have watched many on SA talk about getting out and in of SIRI over and over, profiting every time. My purpose of writing the article was to point out that SIRI is not a safe buy and hold right now. I short SIRI because I think there is alot of euphoria around recent price moves and 2.0, and I believe it will all be a big dissapointment, and the shorts will right size the share price.
5 Reasons Why Sirius XM Is Overvalued [View article]
I understand that many of you love SIRI. Maybe you own Sirius XM Radio players, and subscribe, and think this is the best thing since color TV!
I think SIRI has a good product. I don't think they will climb out of their debt. That is the foundation of my article. Go read the 10-Ks, I provided links and references. Its all there.
Any doubters, please see GM, a company who sold good products but was hopelessly leveraged.
Shorts Continue to Make a Killing on Sirius XM's Stock [View article]
Click my name, read my blog...I lay it all out there. You will be running out the door away from this stock once you digest the information.
5 Stocks Hounded by Short Sellers [View article]
I agree on your comment about the intangibles. After I wrote my post, I dug deeper in the 10-K. The goodwill is the overpayment for XM (of which 75% has already been written down, a good sign that its not over inflated) and the intangibles are for their FCC licences. I am no expert into what FCC bandwidth is worth, so I would have to trust they have valued it appropriately.
I still stand by the fact that the negative book value is disconcerting. It would be one thing if book value was close to 0 after subtracting intangibles/goodwill, but it is very negative. Couple this with the fact they carry 3 billion in long term debt with 200 million last year coming due, and one quickly sees they have a long ways to go. They have to do a few things right for shareholders to see value:
1. Get the debt down
2. Keep the compitition out (now that they bought XM...whats stopping another company from entering the market to fill the void)
3. Keep subscriber base up (may mean not toying with the price)
4. Do so for 5-10 years in a row.
I see why you may feel this stock is a value. They turned a profit for the first time last year after many years of toiling with losses. They were rescued from the clutches of bankruptcy. It really looks like another Ford in some aspects. But as a value investor, I could not accept the current risk at the current price.
What saddens me the most is that so many retail investors, many who read and comment on SA, do not see beyond opinions and share price. They don't know the basics of valuation, nor do they know what is happening to this stock with dilution. They may get in at 1.80 thinking its a better deal than 2.00, not realizing that SIRI can at any moment dilute their holdings by 60%, bringing the value of their purchase below a dollar.
Its not that this stock will never be a good buy...but its not a good buy at 2. Somewhere under $1, assuming profits continue at the current rate and no new debt happens, could be plausible. But not for me...I don't buy companies that have more years of losses than profits, or which have negative book value after intangibles/goodwill.