With Sirius Up 30%, Can Chatter Be True? (SIRI)

[GoodDog]

With Sirius Up 30%, Can Chatter Be True? (SIRI)
Sirius XM Radio (NASDAQ: SIRI) did something rather unusual if you consider its recent downward trend. Its shares rallied close to 30% today. Sure, you have to consider how low shares had gotten and take into consideration how little this means in raw dollar gains. But you also have to consider the meat here and why this would happen.

Last week we discussed how lucky the company is that NASDAQ has pulled its $1.00 ejection button from the listing requirements. Everyone, and that includes us, has commented how the company is drowning in debt. But its debt financing that looked so high when it was made actually looks pretty cheap considering the levels we have seen investment grade and "AAA-rated" issuers have accepted in recent weeks.

We have refrained from printing some of the crazy rumors out there about the company. But when we see gains of this percentage (even in a penny stock) on a bad market day, it makes us wonder if there might finally be some meat to the gossip. There are two issues which could come into play and both have been subject of chatter.

MORE at 24/7 Wall St.: With Sirius Up 30%, Can Chatter Be True? (SIRI)

 

[Triscuit]

In September 2007, there were rumors floating around that Google would buy Sirius. Now that the merger is complete, and with Sirius not exactly financially healthy, do you think Google could make a move?

Here's a link on the rumors from last year: link

 

[awfulwaffle]

And on the day when the whole market jumped up 11%, Sirius dropped 5%. I think not.

 

[Manco]

It only has to rise like 8-9 cents to make a big jump. So you might see some days like that, but for every penny of movement, you might make or lose 3%.

 

[me_rubin]

It only has to rise like 8-9 cents to make a big jump. So you might see some days like that, but for every penny of movement, you might make or lose 3%.

A penny is a long way from the many dollars more people bought the stock at...

 

[Manco]

A penny is a long way from the many dollars more people bought the stock at...

Yeah, tell me about it. I lost plenty on the stock but have moved on.

 

[jwt873]

Things were going good until Goldman Sachs gave them a bad rating. This outfit has been beating SIRI down for over a year now.


Goldman Whacks Sirius XM Growth Estimates, Drops Price Target To $0.25 (SIRI)

October 28, 2008 10:43 AM

Sirius XM Radio (SIRI) has enough bad news to deal with: A souring consumer economy; the decline of the U.S. car industry, where Sirius gets many of its new subscribers; and growing competition. Some new concerns for Mel Karmazin and company: "The viability of the current business model" set against about $1 billion of debt maturities "and an uncertain amount of cash on hand," Goldman's Mark Wienkes notes today.

"Specifically, we believe the current business model will have an increasingly difficult path as the cost of churn [subscribers fleeing the service] impairs the ability to generate free cash requisite to satisfy debt maturities or ultimately accrue any meaningful value to shareholders," he says.

As a result, Wienkes is cutting his growth targets for Sirius XM. He now thinks they'll sign up 644,000 net new subscribers this quarter, down 11% from his previous estimate of 724,000; 1.6 million next year, down 20% from his previous estimate of 2.0 million; and 1.4 million in 2010, down 26% from his previous estimate of 1.9 million.

Wienkes rates SIRI "conviction sell" and thinks the stock should trade for 25 cents. It's down 10% today to 34 cents.

 

[HarleyJoel]

I'm still holding on to my shares. Wishful thinking.