Improving Fundamentals Send Sirius XM Radio Higher 25-Dec-09 11:18 pm
There is a lot of hype building over Sirius XM Radio’s (SIRI) recently leaked new hardware offering that will enable Apple (AAPL) iPhone and iPod Touch devices to be converted into satellite radios which will reportedly receive the XM Satellite Radio service. A lot of people are convinced that this docking station is somehow the reason for the extraordinary gains of Sirius XM common stock this past week.
Don’t be fooled. Although this single new piece of hardware is promising for the future of Satellite Radio, since it takes advantage of the growing popularity of 4G technology as the holiday shopping season begins to loom on the horizon, it has absolutely nothing to do with the rise in Sirius XM share prices.
Will the future offer a portable version? Time will tell. There are no doubt critics waiting in the wings to pounce on the new Sirius XM hardware offering as insignificant.
Let me save them the time.
For those that follow Satwaves, you already know that despite a lot of misinformed media articles from other sources that have made headlines around the world, we have been pounding the table with regards to the improving fundamentals that Sirius XM has been reporting as the reason to own shares of Sirius XM. Those that heeded the advice have seen their investments grow in unimaginable numbers. Those that heeded the recent bullish catapult alert earlier this week have gained nearly 25%. Stay focused.
As the cash for clunkers program winds down it is clear that auto manufacturers are on track to record quarterly sales numbers. The run rate as reported by Edmunds.com had been as high as 19.6 million vehicles in July. At that time, there had been only 1 billion dollars allocated to the CFC program. Funds were quickly exhausted. Sirius XM CEO Mel Karmazin tipped his hand at the Q2 conference call when he announced that Sirius XM had positive subscriber growth in July.
With the arrival of August, we saw an additional 2 billion dollars allocated to CFC. For the mathematically challenged, 2 billion is two times 1 billion and that 2 billion dollars is almost gone. From a satellite radio perspective, it is a complete success. Combined with an improving economic climate, there can be no doubt that subscriber acquisition rate for Sirius XM Radio will be positive again for the month of August, and in more than substantial numbers.
When one considers the company’s operating cost reductions, positive EBITDA and improved guidance, it becomes more likely that Sirius XM Radio is on track to record a quarterly per share profit for the first time. Stocks trade on earnings and, thus far, Sirius XM hasn’t had any on a per share basis. An operating profit is one thing. A net profit is another. And Sirius XM Radio speculators are seeing black.
