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Sirius Is an 8-Bagger

By Rick Aristotle Munarriz | More Articles
April 17, 2009 | Comments (6)

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It has been another good week for Sirius XM Radio (Nasdaq: SIRI  ) , especially if you draw the starting line when shares of the satellite radio operator bottomed out at $0.05 two months ago.

The stock is now an eight-bagger, based on Thursday night's close, and would become a nine-bagger if Friday's intraday highs stick.

The catalyst this week is a welcome nod of approval from credit rating agency Standard & Poor's. It raised its rating on Sirius XM on Tuesday -- to CCC+ from CCC -- two months after an infusion from Liberty Media (Nasdaq: LINTA  ) improved the radio giant's near-term liquidity.

Sure, it's still a junk-bond rating. And S&P didn't change the rating on Sirius XM's senior unsecured notes. However, it's just another baby step in the right direction for a company that many figured would file for Chapter 11 bankruptcy protection two months ago.

The upbeat news comes at a time when Sirius XM itself has been pretty tight-lipped about its near-term prospects. It abandoned its subscriber targets when it posted its fourth-quarter report last month. The only guidance the company is providing at this point is that it expects to top $300 million in operating profits this year.

Even if all of that is consumed by interest payments on debt, it would be a confidence builder, especially for the company's creditors. A buoyant share price may also grant the company the flexibility to use secondary stock offerings to pay down its debt. It would also help the company step back from considering a reverse stock split, which has ended poorly for most companies, save for priceline.com (Nasdaq: PCLN  ) .

Sirius XM has a long way to go. We have yet to see if likely near-term catalysts -- like the Apple (Nasdaq: AAPL  ) iPhone app that Sirius XM is releasing this quarter or whispers of a bundled package with satellite television giant DirecTV (NYSE: DTV  ) -- pan out.

However, as long as the shorts keep coming despite the steady trickle of positive developments, there could be more bags in Sirius XM's future.

More news than static on Sirius XM:

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Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 17, 2009, at 4:12 PM, rsafunding wrote:

    Good to see the company on the road back. I have been a loyal subscriber for 3 years and love the programming and also advertise my business on the channels for a very reasonable cost. www.rsafunding.com

  • Report this Comment On April 17, 2009, at 9:59 PM, wishing4utopia wrote:

    I've been searching on the internet and can't find the meaning of the terms "eight-bagger", "nine-bagger". What does the "bagger" mean and what does the incline in number indicate?

    Thnx for a reply

  • Report this Comment On April 18, 2009, at 7:20 AM, lotontech wrote:

    In answer to wishing4utopia's question:

    A ten-bagger is a stock whose price has increased by a factor of 10x, e.g. from $1 per share to $10 per share.

    Form this you can no doubt work out what an eight-bagger or nine-bagger is ;-)

  • Report this Comment On April 18, 2009, at 2:34 PM, ralston3057 wrote:

    Rick,

    Maybe you have not read the Barrons Interview. They report that there are no plans for a reverse split for siri.

    http://blogs.barrons.com/techtraderdaily/2009/04/17/update-o...

    On Sirius, Liberty sees “lots of leverage to the operating base.” (Translation: if Sirius were to raise rates on its 19 million subscribers, they could boost cash flow performance.) He also said the company is looking at many options on next moves, in particular trying to figure out ways to benefit from the company’s substantial net operating loss carryforwards. He says Liberty is looking at things like converting some debt to preferred shares and various sale/leaseback arrangements, among other things. Malone and Maffei are some of the world’s most creative financial engineers, and Sirius gives then some new opportunities to play.

    According to Arenson, the company indicated no plans for a reverse split to SIRI shares.

    They have no visibility on auto sales, and therefore not much on Sirius subscriber growth, either.

    Arenson said that CFO Frear played down the importance of the new Sirius app for the Apple iPhone, although Arenson said he understands some people internally are more excited about it. He also reports that Sirius continues to re-negotiate their contracts with a variety of content providers, including Howard Stern and Major League Baseball.

  • Report this Comment On April 18, 2009, at 9:10 PM, greenwave3 wrote:

    Bonds are the only way to go with SIRI. The common stock is toast.

  • Report this Comment On April 20, 2009, at 10:52 AM, MADACASTO wrote:

    wishing4utopia - it means "you can wish in one hand and crap in the other, and see which one gets filled first".

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5/25/2012 4:00 PM
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