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Will Sirius XM Be Boring in 2011?

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Legendary rocker Paul McCartney entertained fans -- the lucky ones to nab tickets from Sirius XM Radio (Nasdaq: SIRI  ) and perhaps millions more through the live broadcasts on Sirius and XM -- for two hours last night.

Digging into his deep catalog of solo and Beatles' hits, the show was Sirius XM's way of celebrating hitting the 20-million subscriber milestone.

One can also say that it also marks the end of many of the question marks surrounding Sirius XM.

  • There are no more questions about Howard Stern. The company's highest-paid talent signed up for a new five-year deal last week. There's also a mobile streaming component to the new deal.
  • There are longer any doubts about which way its user base is trending. Sirius XM is just weeks away from completing its sixth consecutive quarter of sequential subscriber growth. It's a safer bet that Sirius XM will hit 25 million subs in a couple of years -- and not fall back to 15 million.
  • There aren't any debt repayment milestones to worry about in the near term. Sirius XM has been able to refinance most of its immediate debt burden -- and at lower interest rates, to boot.

Sirius is no longer buzzard bait. It's consistently profitable, much to the delight of Liberty Capital (Nasdaq: LCAPA  ) which opportunistically swooped in when things appeared dire to grab a 40% preferred share stake.

There is also no longer a need to engage in a reverse stock split to satisfy NASDAQ OMX Group's (Nasdaq: NDAQ  ) minimum listing requirements. The beefy 6.4 billion shares outstanding will keep the stock trading in the single digits, but now a split is simply a matter of aesthetics or institutional investor appeal.

Can it be? Will Sirius XM be, dare I say, boring, to watch next year?

I doubt it. There may certainly be less volatility in store for investors in 2011, but this is still a company with room to bump its guidance higher along the way. The resolution of uncertainty may have been the biggest catalyst for serious stock gains in 2010, but there is still the modelwidening potential of Sirius XM 2.0 to watch out for next year. Now that Stern's channels will stream through Sirius XM's mobile apps, there may also be some incremental business gained through its premium streaming for Apple (Nasdaq: AAPL  ) , Research in Motion (Nasdaq: RIMM  ) , and Android smartphones.

The stock more than doubled in 2010. Investors shouldn't expect an encore performance in 2011. Justifying an enterprise value of $12 billion today takes a certain leap of faith. Trying to validate an enterprise price tag of $21 billion (that's nearly $18 billion in market cap and another $3 billion in long-term debt) is more along the lines of a blindfolded parachute jump.

However, just as rightfully predicted that Sirius XM will gain ground in 2010, I still believe that the Sirius XM story has some exciting chapters in store.

McCartney may have left the stage, but now it's time for CEO Mel Karmazin to jam.

Will Sirius XM go higher or lower in 2011? Share your thoughts in the comment box below.

Nasdaq OMX Group is a Motley Fool Inside Value pick. Apple is a Motley Fool Stock Advisor choice. Motley Fool Options has recommended writing covered calls on Nasdaq OMX Group. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

Read/Post Comments (13) | Recommend This Article (21)

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 December 14, 2010, at 3:11 PM, bridgesafe wrote:

    I'm surprised that with the new contract signed with HS that siri stock hasn't gained more than a few cents, plus 20 million subscribers, I'm holding my shares, thinking more gains are in store.

  • Report this Comment On December 14, 2010, at 3:15 PM, Valuestocksonly wrote:

    I hope it is real boring. I am looking for a gradual climb that sticks. No more wild rides. Buy the dips and sell the rips.

  • Report this Comment On December 14, 2010, at 3:30 PM, bobalu478 wrote:



    BOB C

  • Report this Comment On December 14, 2010, at 3:53 PM, yabradley wrote:

    Fasten your seat belt and enjoy what will be a wild ride. Sirius XM is headed back to it's pre-merger stock price. I predict $8.00 by year end 2011. Content + internet = $$$$$!!


  • Report this Comment On December 14, 2010, at 4:16 PM, nazareth2 wrote:

    Now that everything is firing on all ciliders where is all the advertising and where is all the the products? I would love to have a radio that I could use at home as an alarm clock and wake up to Sirius.After reading alot of pedictions It seems Sirius is heading to the XM platform? Wish I new which way they were headed so I can change subscripions and or radios? This should all be out there now and its not.Anyone been to best buy its pitiful. All i-pod stuff Sirius XM barren.Nothing new except for that XM snap, big deal.Come on Sirius let us know whats up.....

  • Report this Comment On December 14, 2010, at 4:22 PM, nazareth2 wrote:

    Now that everything is firing on all cylinders where is all the advertising and where is all the the products? I would love to have a radio that I could use at home as an alarm clock and wake up to Sirius. After reading allot of predictions It seems Sirius is heading to the XM platform? Wish I new which way they were headed so I can change subscriptions and or radios? This should all be out there now and its not. Anyone been to best buy its pitiful. All i-pod stuff Sirius XM barren. Nothing new except for that XM snap, big deal. Come on Sirius let us know what's up.....

  • Report this Comment On December 14, 2010, at 4:45 PM, SiriusXMheat wrote:

    I beg to differ as I'm looking forward to another great forward ride as we've seen in the past. We can count on the following:

    1. Continued sustained growth

    2. SIRIUSXM 2.0

    3. Continued S & P Credit debt rating upgrades

    4. Signing more content

    5. Continued deeper penetration into new cars, used cars, and internet

    6. $1BILLION free cash flow by 2015 with no debt.

    7. Expanding deeper into the Spanish market

    Lots of good reasons for SIRI to be a good core investment for the future. This stock has great potential and the best is yet to come.

  • Report this Comment On December 14, 2010, at 5:06 PM, grorate25 wrote:

    I like many still own the shares. I hope I can enjoy the reward before I am beyond my time. I anticipate $7.00 within 24 months. Keep in mind, when it hits $5.00, institutions will move it to $7.00 very quickly.

  • Report this Comment On December 14, 2010, at 5:13 PM, bridgesafe wrote:

    This is my only penny stock, must be why I keep track of it so much, I wonder when we'll see siri TV as in our homes , seems they could go Wi-Fi on our cable and computers,commercial free TV would be as great as commercial radio, even better, why do they slowely bring things to the table, I wish Steve Jobs was on the board of directors at siri,he could show them how to be GREAT instead of so so, by the way I bought apple the very day Jobs came back as CEO, have never sold a share

  • Report this Comment On December 14, 2010, at 8:43 PM, Guise wrote:

    Sirius should be an analogy for life in an average American home. The entertainment side, likened to trendy clueless teenagers, should be exciting and fresh; however, the business end of things, likened to the grown-ups who pay the bills, ought to be very boring and stable. So, as one of the grown-ups, I welcome a steady, predictable growth. There so much potential. When Sirius becomes an "Apple" of mobile entertainment and various satellite service packages (GPS, Onstar competitor, etc), the "youngsters" will enjoy the bandwagon success of a solid, established company. We'll look back, knowing the risks we took during the growth years, sigh and say, "I remember when."

  • Report this Comment On December 15, 2010, at 2:44 PM, eiswien wrote:

    This stock is a "Perfect Storm"!

    -all the of the key indicators are in the right place:

    -short interests are comming out of the stock

    -no loan or debt issues with cash flow being IMPROVED by debt restructure

    -Free cash flow of $250M with targets of $1B

    - record number of new subscribers = $$$

    - it is the only product of its kind and a good one at that.

    - the market is looking for a few new "breakout" stocks and sooner or later those in charge of munipulating the market up or down will choose SIRI. - frankly its too low to take seriously as a short and you cant fall off the floor.

    SiriusXM could easily hit $4 and even $10 in the next year. It is a great stock or option play.

  • Report this Comment On December 15, 2010, at 3:03 PM, PokerRon wrote:

    Sirius's growth is guarenteed. The product will increasingly become an integral part of the car owning experience - like payTV in the home. Share price will remain in the $1.40 - $1.60 range until the debt structure is significantly improved - and that's just a matter of time. I started buying at $7 and was buying at $0.13 - is $1.23, so I'm finally ahead of the game. I own a lot of shares and expect Sirius to make me very rich within 2-3 years. When doubters ask what does Sirius offer? I tell 'em, content, content, content, and more content!

  • Report this Comment On December 31, 2010, at 12:37 PM, diver92 wrote:

    good investment, started at .56. Ford addition of blocking explicit channels will not hurt the stock. teenagers as a rule do not buy new cars.Plan to stay for the long term

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