This Week in Sirius XM Radio

Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  ) moved lower this week, closing off by 3.2% to hit $3.05. The general market also moved lower, but the company did outpace the major indices on the way down.

There was more going on beyond the share-price gyrations, though. Despite having a historically high number of shares sold short, a short squeeze failed to materialize. Sirius XM also announced that its CEO will speak at an investing conference next week. And streaming-music leader Pandora (NYSE: P  ) announced a date for its next quarterly report.

Let's take a closer look.

Short people
There were a hefty 401.6 million shares of Sirius XM sold short when the month began. The stock is trading marginally lower in February -- despite posting another blowout quarter -- so it's not as if the more recent naysayers are hurting.

On the surface, it's easy to see why the bears are gathering around the volatile stock. Liberty Media (NASDAQ: LMCA  ) now has majority control of the company. It doesn't have to buy any more shares to call the shots, and speculation of a tax-advantaged spinoff to Liberty Media shareholders could result in a selloff.

However, that certainly hasn't happened with Liberty Media's most recent spinoff. Shares of Starz (NASDAQ: STRZA  ) have soared nearly 40% since being handed off to Liberty Media shareholders last month. The stock hit a fresh high this week!

Sure, Sirius XM has a lot more shares outstanding. There will probably be some selling pressure given the company's large float. But isn't this why Sirius XM has authorized $2 billion in buybacks? The company appears to be arming itself accordingly for this possibility, even as Liberty Media's history of spinoffs appears to be positive for the companies being freed as standalone entities.

An Oscar for Meyer
CEO Jim Meyer has been at the helm for only a couple of months, but he doesn't seem to be looking over his shoulder to see whether Liberty Media will go in a different direction.

Sirius XM announced that Meyer will be a presenter at the Morgan Stanley Technology, Media, and Telecom Conference in California on Tuesday. This is a fairly strong indication that Meyer isn't just the interim CEO anymore. He's now being formally tasked to represent the fast-growing media company at a popular conference hosted by one of the country's largest investment bankers.

There may be little to learn during the presentation that avid followers of Sirius XM don't already know, though it wouldn't hurt if the company provided some color on its recent streaming initiatives or if there has been any resistance to this month's increase in the service's music royalty fee.

Pandora in play
The leading music-streaming website will report fresh financials on March 7. We already know what analysts think. They see Pandora posting a widening deficit despite a better than 50% year-over-year spike in revenue.

Pandora has a problem. There are too many free accounts, and when you combine covering the bandwidth costs to serve up the tunes, the low rates that advertisers are willing to pay, and the escalating royalty rates that the music makers expect, you can see why it's hard for the company to turn a profit.

This isn't a problem at Sirius XM. It's been making inroads in streaming, but it has no intentions of becoming a free streaming website. It offers standalone streaming accounts at the same rate as its receiver-based plans, though it allows receiver-based accounts to pay just $3.50 a month to add the digital service to their plans.

Pandora still needs to fortify its model, and not just because of the potential threat Sirius XM poses as it markets its recently expanded streaming service to the folks who actually pay for radio. Pandora's biggest threat is that it's just a matter of time before Apple (NASDAQ: AAPL  ) crashes the party.

The Apple buffs at 9 to 5 Mac unearthed some "radio buy buttons" in jailbroken iPads running iOS 6.1 earlier this month. The move suggests that Apple is paving the way for a streaming service where listeners can refer to iTunes to purchase songs that they like.

That would be a no-brainer move for a company that led the digital-music revolution but has surprisingly stayed away from the music-discovery market so far.

Sirius XM will naturally also be taking notes, especially if Apple raises the bar on ways to monetize streaming through digital download purchases in a compelling manner. For now, it's just Pandora on deck, though it won't be long before Apple has a say here.

That's about it, but another interesting week is on the way.

Dig deeper into Sirius XM
Even though Sirius XM is one of the market's biggest winners since bottoming out three years ago, there's still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in our brand-new premium report. To get started, just click here now.


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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 February 23, 2013, at 10:04 AM, JesseNash wrote:

    Rick

    You wrote:

    "On the surface, it's easy to see why the bears are gathering around the volatile stock. Liberty Media (NASDAQ: LMCA ) now has majority control of the company. It doesn't have to buy any more shares to call the shots, and speculation of a tax-advantaged spinoff to Liberty Media shareholders could result in a selloff."

    You keep mentioning the possibility of a RMT as the reason for the selling. You failed to write that it has already been established that there will be no Reverse Morris Trust until the earliest 2015. Greg Maffei already made this statement and confirmed that. Yet you keep using the "threat" of a RMT as a reason for pressure on shares.

    So why keep writing about it?

    The better analysis is there is pressure on the shares because a share buyback will happen shortly and why pay $3.25 when you can pay $3?

    And another indicator is Avafin.com. This tracks the money flow into and out of a stock. Although there was a negative $2.8 million on Friday, for SIRI that doesn't set off alarms when you can see that, despite the share price going down, for the most part, the money flow into SIRI shares has been positive. This shows that overall there is no selloff, just the market makers doing what they do best.

    My advice: if you are going to report the goings on about a stock -- any stock -- then you need to do your due dilligence and report on ALL the moving parts, not just the ones that suit your agenda in your article. Speculation is one thing. We all know every writer wants people to click on their article cause that's how you make your money. But you shouldn't forget, there are a lot of retail investors who read writers like yourself and are looking for guidance. All too often, I've seen articles written in the past on this and other sites that have been void of truths and filled more with conjecture, or wreaked of some kind of agenda being put forth.

    What you write can hurt and/or help people. A conscience is necessary, yes?

    And if anything -- as a journalist, it's called "fair and balanced reporting." Maybe you read that code of ethics at the beginning of your career and somehow forgot about that code of honor? If not, I suggest you have a think about it.

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