This Week's 5 Smartest Stock Moves

If you're feeling good about the market, you're not alone. Take my hand as we go over some of this week's more uplifting headlines.

1. Dishing out a lot of dollars
If you want courtroom drama, you'll have to set your DVR to record one, because TiVo (Nasdaq: TIVO  ) and DISH Network (Nasdaq: DISH  ) have finally concluded a seven-year court battle over the DVR pioneer's intellectual property. DISH will have to pay at least $500 million to TiVo. That may seem like a lot of money, but both stocks popped higher on the news.

It was a forgone conclusion that TiVo would emerge victorious, so now there's simply relief from both camps.

Both companies now have bigger fish to fry. DISH remains the distant silver medalist in satellite television, and TiVo continues to shed subscribers. At least now they can focus on tackling those issues instead of one another.

2. eBay goes fishing for charity
eBay
(Nasdaq: EBAY  ) is buying a proven upstart with a philanthropic bent.

The marketplace giant is buying MissionFish, the company that has powered the eBay Giving Works initiative, helping to raise $250 million for nonprofits along the way. Sellers can put up items whose proceeds are distributed to charitable organizations, and buyers dig into their pockets to make donations. This move won't be much of a game-changer for eBay's bottom line, but it's a step toward regaining its growth mojo on the auction front.

3. Spinning like satellites
Leave it to Sirius XM Radio (Nasdaq: SIRI  ) to turn a disappointing quarterly report into a winner by announcing an increase in its subscriber rates.

The satellite-radio giant's quarter was a stinker on several fronts. Revenue grew by a lower-than-expected 9%. Average revenue per user, conversion rates, and churn took sequential turns for the worse.

CEO Mel Karmazin then stepped in to save the day during Tuesday morning's conference call, alluding to higher subscriber rates that may come shortly after the company's three-year regulatory price freeze ends this summer. For a company with billions in tax-loss carryforwards, most of the increases should go straight to the bottom line.

The optimism explains why Standard & Poor's analyst Tuna Amobi bumped his price target on the shares, from $2 to $2.50, despite a ho-hum quarterly report.

4. Just what the doctor ordered
They say that the best compromises are the ones that leave both parties a bit unhappy.

It doesn't work that way in the M&A realm, though. The best buyouts are the ones where shares of both the acquirer and the acquired climb on the news. Teva Pharmaceutical (Nasdaq: TEVA  ) and Cephalon (Nasdaq: CEPH  ) both moved higher on Monday, after Israeli-based Teva announced that it would buy Cephalon in a $6.8 billion deal.

Teva's 3% uptick and Cephalon's 4% pop validate the deal.

5. Netflix bowls a perfect score
Another company nabbing a juicy analyst price target despite recently hitting new highs was Netflix (Nasdaq: NFLX  ) . Citi's Mark Mahaney upgraded the video-rental giant from hold to buy, while bumping his price target all the way up to $300.

It's true that Mahaney doesn't like to sit still. He has shifted gears on Netflix four times over the past year alone. However, he thinks Netflix is being penalized for the losses it will incur as it expands its streaming service beyond Canada. He also believes that the company's domestic business could be good for as much as $8 a share next year, a far cry from the $6.49 a share that analysts believe all of Netflix will deliver in 2012.

Mahaney's aiming high on all fronts, and historically that has been the winning approach when it comes to Netflix.

Want to follow Sirius XM, Netflix, or any other stock in this story? Follow the links to add them to My Watchlist, which will gather all of our Foolish coverage on them.

eBay and Netflix are Motley Fool Stock Advisor recommendations. Teva Pharmaceutical is a Motley Fool Global Gains pick. Alpha Newsletter Account, LLC, has bought puts on Netflix. The Fool owns shares of Teva Pharmaceutical. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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 an optimist at every turn. He owns shares of Netflix and 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.


Read/Post Comments (9) | Recommend This Article (8)

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  • Report this Comment On May 06, 2011, at 12:57 PM, eiswien wrote:

    "The satellite-radio giant's quarter was a stinker on several fronts. Revenue grew by a lower-than-expected 9%. Average revenue per user"

    i dont get you, SIRI raises the rev by close to 10% and you call it a "stinker".

    THAT IS 10% rev growth, positive cash flow, increased free cash flow and you call it a stinker!

    what is it with this system. The analysts say it should be X and the number comes in at a fraction below that and everyone jabbers about how disasterous the performace was.

    this is a well run company, with a good product (monopoly), that has overcome great adversity, come back from teh brink of death, and this company is going places.

    you must be short the stock, if not through your own accounts, through your wifes account.

    YOU should NOT buy this stock - you might make some money...and that would be..."a stinker"???

    go figure.

  • Report this Comment On May 06, 2011, at 1:17 PM, bottomfisherman wrote:

    Huh????? A stinker how? Subscribers increased to over 20 million with a revenue of $140 dollars per subscriber coming in vs Clear Channel that brings in roughly $13 dollars and lagging far far behind Pandora at $4.00 and some change. I loaded up more on this "stinker" this morning before the price shot up and looks it might settle near 2.25 next week and hit the target of your previous article of $2.50 not by the end of the year but by the end of the month.

    Disclosure I am long this "stinker."

  • Report this Comment On May 06, 2011, at 1:42 PM, eiswien wrote:

    Bottomfisherman,

    i have loaded up as well over the past weeks and a few days ago. Im wallowing in "the stink".

    i wrote a response to Cameron Kaine's article about postivie performance of SIRI a couple of weeks ago when teh stock was around 1.8 and thought it might be a good to add here. These are my personal thoughts and suppositions, but the stock hit 2 a couple of days after i wrote this.

    here it is:

    ----------------------------------------------------------

    Personally, I see this stock as the perfect storm. If it hits 2, I think it will hit 7. This is purely supposition on my part, but here is the reasoning behind my thoughts.

    -if the stock hits 2 it will push another 25-50 cents immediately on the " perceived increased legitimacy" of the stock and the "frenzy" to get in on some movement..."the penny stock that is going to make it!!!"

    -the "news slanting" authors will then write about the stuff they write about increasing awareness and interest that the stock is now on the move.

    -hedgefunds will sell their existing positions and continue to acquire new ones creating increased volume. Additional movement pushes stock up to @3

    -Sirius itself will strategically make one or several well timed announcements about increased profits, subscribers, technological advances, etc. which will create another or other large spikes say 30-50 cents at a time. Ex. close at 3.50; open at 3.90 or 4. Rinse and repeat on this step gets us into mid or late $4 range.

    - additional attention of media and TV "taking head"

    anal-ists who will create more demand of a stock "on the breakout". Movement will push against or break through 5.

    - once 5 is hit, institutions will come into the stock heavily and push it up to 7 or beyond.

    -analysts and other writers will say "THIS COMPANY IS AMAZING, YOU MUST BUY SOME B/C WE RECOMMEND IT"

    - enter the shorts and the continued up and down of this favorite toy of investors everywhere.

    Additionally, there are a few other points to note as to why i think it can be a 'perfect storm':

    1. The market is in need of a good breakout / success story about now.

    2. Those forces who manipulate the markets; brokers, market makers, traders, institutions like "the Goldman Sachs" etc will drive this issue up in order to set up shorts or strategic long gains either with a continued run upward followed by a crash or continued up / down manipulation to create turnover of shares.

    3. The stock is currently so low that short interest does not offer big windfalls at current levels, but short opportunities would improve substantially at say 5-7 per share.

    4. The market needs a good "breakout story" to aid in restoring consumer confidence in this most interesting of ways to gamble.

    5. There is an individual "cult following" of investors of this stock. From what I have seen, heard, and read (in columns like these) most of them are in for the long haul. The combined effect of individuals who hold their shares and enter investors/institutions who want to buy shares and that equals stock price rise.

    6. If the company itself begins to buyback its own shares off the open market, which has been suggested, that will also prop up the price.

    and again I say this is all personal supposition.

    Thoughts?

  • Report this Comment On May 06, 2011, at 4:12 PM, whyaduck1128 wrote:

    This is the kind of stock I buy as a speculative pick, putting in only spec money. With the stock well above the price at which I bought it, I sold a quarter of my holdings this week. If it goes up another 50%, I'll sell some more, and so on.

  • Report this Comment On May 06, 2011, at 4:14 PM, doubting wrote:

    Rick,

    It appears that someone got into you, probably a daredevil when you make statements like below:

    "The satellite-radio giant's quarter was a stinker on several fronts. Revenue grew by a lower-than-expected 9%. Average revenue per user, conversion rates, and churn took sequential turns for the worse."

    Let us be serious and respect the 9% growth topped with 370K new subs. All other parameters were within norm. Do you cry foul when your blood pressure goes up to 130:80 from 125: 75? Any doctor in sober mind would call you still healthy. This is not a trend. As to the price increase news, this is no news. You should know that because Karmazin spoke about it during the previous Quarter CC, maybe not with as much confidence and enthusiasm as on May the 3rd. Let us wake up and look at the company soberly. Sirius is definitely out of the woods. Subs keep growing at a healthy pace, capex is going down, revenue will go up, price increase is around the corner, share buyback in 2012 is a given, debt is being repaid in good chunks. What else do you want? A miracle!!! There won't be any miracles, save 40% profit margin in the coming years. Is that not enough? What else do we want? Have them stand on their heads for our entertainment?!!! Let us get serious about Sirius XM. The company is a diamond whose sides have been murky and are starting to shine as we speak. You and others need to get used to this. Whatever negative stuff is going to be written, market forces will still prevail. You cannot stop the progress whatever you write. I hope this is not news to you or others. If you want your reputation shine, get back on the wagon before it is too late. I thought you were but now it appears you moved to the fence and started bashing again, hopefully for a change.

  • Report this Comment On May 06, 2011, at 4:18 PM, pryan37bb wrote:

    When I bought SIRI last November, I was young and foolish. And not the good kind of foolish. I paid no mind to the EPS or the PEG ratio. It earned one cent per share this past quarter. A stock that earns four cents per share annually, that sells for two bucks, would have a PE of 50, meaning that for it to be fairly valued, its holders must anticipate 50% annual revenue growth. While I'm happy with the gains I've made so far, that kind of growth seems lofty for a company that already has 20 mill subs and flirted with Chapter 11 not too long ago

  • Report this Comment On May 06, 2011, at 5:22 PM, siriuslyrick wrote:

    From flirting with Chapter 11 to a good, healthy, solid relationship with success in only a few short years. Way to go, Mel!

    Rick, I'll accept your "ho-hum," but really...."stinker?" Did you forget your meds this morning?

  • Report this Comment On May 06, 2011, at 6:30 PM, doubting wrote:

    Sirius is a discretionary service that is not for everybody and unlikely will be unless they introduce free service with limited music channels with commercials similar to Pandora where you will be able to customize to some degree. This could become possible with sat radio 2.0. Although their monthly fee is ridiculously inexpensive, there is still a very large cross-section of the population at any given time in this country that will not sign up for all kinds of reasons. This group encompasses people with low income and students who cannot afford to pay even $15/month as well as misers who won’t pay for anything, be it radio or a doughnut if there are, though inferior, but still free alternatives. However, there are about fifty million people in this country who will most likely subscribe and may have more than one subscription. This is why I estimate Sirius’ “capacity” within the next twenty years at about seventy five (75) million subscriptions. As you can see, there is still plenty of growth. In addition, when both services truly merge, Sirius will have free capacity that it could use for other purposes. Satellites have tremendous scope of uses and the company may get into areas we may not even imagine at the moment.

    I call Sirius a monopoly in the sense that there is not a single radio company that can compete with it on the same level playing field. Just imagine that there is one and only luxury car manufacturer. This is exactly what Sirius is: one and only “luxury” radio. I used quotes because Sirius is not a luxury by any means for the price they charge vs. the value. I cannot see anyone realistically competing with Sirius in the auto or boat, plane and any other vehicle. Internet radio service in the auto is a joke because no one is going to read their banners while driving to risk their lives, or they will have to have voice ads and be like terrestrial radio. What is the appeal then? Plus sooner or later they will run into the issue of capacity and internet providers will have to start charging for usage.

    I see near-term stock price at four or five in 2011. I have no doubt that the price freeze will be lifted and Karmazin will increase the price by $2 or maybe even $3. One may cry foul that they increased the price by 25%. So what? First, everybody does that. Cable and sat TV providers as well as mobile providers constantly jack prices up and charge through the nose between six hundred and three thousand annually and we do pay. Second, we are talking meager $2 or $3 dollars not $20 or $30 per month. Third, the core 17M subs will not budge like they never did with royalty fees although analysts were predicting the end of the world. Why? Because the service will still be strikingly inexpensive compared to literally anything else you can think of; and they CAN AFFORD it. I believe the mere announcement of price freeze lift will add $.50 to the stock. Once they introduce the actual price increase, we can see another $1.50+ by the end of 2011 bringing the stock to $4 or maybe even higher. 2012 is the first year with radically lower capex, some increased pricing impact, and we will see stock appreciating very fast. Plus sometime between late 2011 and mid 2012 Karmazin will announce the share buyback. The stock will rocket both on the news and on the hype like it did when they announced HS moving to Sirius. Sat radio 2.0 may or may not be a large contributor but if it is, we will see a significant improvement in the retail pool as well

    If we assume conservatively that Sirius has about 31 million subs by 2017 and annual ARPU is about $170 per customer, we have about $5.3 billion revenue in 2016, with EBIDTA at about $2.7B and fcf at $2.4B. The question is what multiple to apply. I believe that the company with such margins and growth deserves at least x 25 that brings us to $60 billion valuation. If they buy back 1 billion shares (about 3 billion float + 2 billion shares of liberty’s remaining 40%) by 2017, the stock will be valued at $12 per share. This does not account for the market hype that could add another 50% to 100%.

    All my assumptions are based on economy improvement and no catastrophic events. As to the perennial question if Sirius will or will not be growing, it is time to put it to rest. It arises every quarter and the company disproves the doubting Thomases like it has done this past quarter. I believe that Sirius is at the very beginning of a true rise and the really good times are still ahead. The only thing that may interfere with the company is its purchase by Malone or other suitors. However, I just wonder where Malone is going to get $16 billion or so ($4/share x 4 billion float in early 2012). I hope very much that this will not happen because Sirius will be a stellar company on its own.

  • Report this Comment On May 06, 2011, at 11:49 PM, grbbiker wrote:

    guys, guys, i think our memories of rick's coverage are too short. more that 10-12 months ago i recall being intrigued by his remarks on siri, and then he admitted being turned more positive on the stock. why do i recall this while i have been a subscriber to stock advisor.? because i have learned to listen when he speaks. he turned me on to nflx, neu, siri, bidu, appl and netscout over the past two years for gains that have been very welcome in my ira. i continue to listen. separate the tongue-in-cheek from the sardonic from the serious hints from the 'accolading' stuff in his commentaries.... he is entertaining if you give him the leeway.

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