Why Sirius XM Is Poised to Pull Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, satellite radio services specialist Sirius XM Radio (NASDAQ: SIRI  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Sirius, and see what CAPS investors are saying about the stock right now.

Sirius facts

   

Headquarters (founded)

New York (1990)

Market Cap

$20.3 billion

Industry

Cable and satellite

Trailing-12-Month Revenue

$3.4 billion

Management

CEO James Meyer (since 2012)

Chief Content Officer Scott Greenstein (since 2004)

Return on Equity (average, past 3 years)

10.8%

Cash/Debt

$521.0 million / $2.4 billion

Competitors

Apple 

CBS

Pandora Media 

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 28% of the 786 All-Star members who have rated Sirius believe the stock will underperform the S&P 500 going forward.

Just last month, one of those Fools, Gibybo, touched on Sirius' seemingly lofty valuation:

Earnings are roughly $400M (after adjusting for the $3B income tax adjustment a few quarters ago), so [$20B market cap] is a pretty high multiple of that. That would imply some pretty aggressive growth prospects, but I'm not sure what that would be. Satellite radio is not likely to be a growth industry over the next 10 years, and their other markets are pretty small.

Of course, despite Sirius XM being one of the market's biggest winners since bottoming out three years ago, there might still be some healthy upside if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in The Motley Fool's brand new premium report. To get started, just click here now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.


Read/Post Comments (11) | Recommend This Article (2)

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 March 23, 2013, at 7:26 AM, JesseNash wrote:

    Hey Brian! What a biased short story. "Out of 786 All-Star members (who are these freaking people anyway, and do we really care???!!!) 28% of them say that SIRI is due for a pullback." Geez man! Are you (and your investor friends) short the stock or what!!!?? So let's do some math: 28% "All-Star Members" say that SIRI is due for a pullback. so 72% say you're freaking wrong and that the stock is going up????!!! This is why I think your website is a bad thing. Writing crap like this with no fundamental reason other than the same drivel about "valuation." If the valuation is so off, why did John Malone spend billions buying it? And what about those 72% of your brilliant All-Star members? Others on your site have focused on the 72% who believe the stock is a "hold or a buy." You, Brian, should be ashamed of yourself for writing this crap and for any sane reader to take you seriously.

  • Report this Comment On March 23, 2013, at 7:31 AM, Austin77478 wrote:

    "Satellite radio is not likely to be a growth industry over the next 10 years, and their other markets are pretty small."

    This kind of quote is one of the shorts' playbook. People like Rocco and Cameron Kaine Saintvilus have put up quotes similar to this before.

  • Report this Comment On March 23, 2013, at 7:41 AM, 67vair wrote:

    Worthless babble.

  • Report this Comment On March 23, 2013, at 8:02 AM, JesseNash wrote:

    No response huh Brian? Spineless toad is an expression that comes to mind.

  • Report this Comment On March 23, 2013, at 9:07 AM, Varchild2008 wrote:

    "Satellite radio is not likely to be a growth industry over the next 10 years, and their other markets are pretty small."

    So why was it a growth industry over the past 10 years?

    In fact, according to Mike Church on the Patriot Channel, there were only just over 23,000 subscribers when he first started his show on Sirius. Now there are over 23 million subscribers.

    This could easily reach 100 million in 10 years given that Sirius XM is able to land popular new content for their subscribers (Bon Jovi, Entertainment Weekly, etc.) That is what drives "Industry Growth" away from internet radio stations...Content.

    While Pandora struggles to make a profit, Sirius XM is making new offerings.

    Sirius XM is not just a Satellite Radio station either now that they also have an internet streaming service. Yes, some will complain about it being an additional cost to subscribers....except that isn't always the case. Customers new to Sirius XM can choose to subscribe ONLY to the internet radio option (correct me if I am wrong).

    I can easily see the next logical step for Sirius XM is to bring their streaming service to the console systems. Currently, you have to use media center software and hook up your console to your MAC or PC. I don't believe XBOX 360 has a Sirius XM software app right now.

    Then after that....They could make a move to Television. Much like Rush Limbaugh uses a Web Camera for his Rush subscribers, they could do the same for Howard Stern, Patriot Channel, and so on....put it on Television....Support it with commercials. Fans will watch the shows on television and immediately want to subscribe to SIRIUS XM.

    But......No....There's no growth to be had here right?

  • Report this Comment On March 23, 2013, at 9:28 AM, Walsher wrote:

    Rocco and Cameron kaine have all but disappeared after burying their heads in the sand. Both have since admitted they were wrong about Siri. Both were bashing well below $2 now look at the shareprice! $4 by year end is Likely.

  • Report this Comment On March 23, 2013, at 10:13 AM, crankly09 wrote:

    It's been a "FOOL' 2 star stock for years now.......even though it's gained more than 1500% in value since I've been accumulating my shares!!!

    I'll take a "2 star FOOL stock" any day of the week with those kind of returns.

    FOOLS.

  • Report this Comment On March 23, 2013, at 10:48 PM, DavidinNV wrote:

    Anyone suggesting that satellite radio will not be a growth story over the next 10 years has not been paying attention to what Sirius XM has been saying about the explosive growth expected in the used-car market. Right now, the company has deals with more than 8,000 used-car dealers, and only now are cars equipped with satellite receivers coming into the pre-owned-vehicle market. As I see it, the company is sitting on a semi-dormant volcano which is poised to erupt. In addition, music lovers have many choices, but ONLY SIRI offers the breadth of content that most listeners except teeny-boppers seek.

  • Report this Comment On March 25, 2013, at 7:43 AM, User404366 wrote:

    Is this Rocco's new alias or something? You can't properly value companies with net income - you have to use free cash flow for that buddy boy.

  • Report this Comment On March 26, 2013, at 2:25 PM, kmacattack wrote:

    I bought this stock 3 years ago right after they were emerging from the gates of Hell at an average of $1.01 per share. You state that the return on equity for the past 3 years has been 10.8%. I didn't major in math in college, but your posting proves that "Figures Lie and Liars figure" Let's see, I paid $1.01 per share, and the stock is now priced following a pullback of $3.07. Since I am not a greedy man, I think I can be happy with that 3% profit..

  • Report this Comment On March 26, 2013, at 2:39 PM, kmacattack wrote:

    When I bought SIRI, the stock was trading at well over 100 times earnings and my long time broker thought I was crazy to pay such a premium for SIRI. I looked at the TRENDS, which told me that SIRI was going to be able to pay down their enormous debt quickly once they topped the "break even Nut" of about 16 million subsribers. Once the costs are covered, next to prostitution this might be the most profitable industry in the world. SIRI sells AIR, and with every new subsciber, the cost per sub goes down and the dollar and percentage profit goes UP. They should be totally debt free within a year after paying off about $8 BILLION in debt far earlier than expected. Sirius has been the tail wagging the Liberty Media dog. Sirius is by far the most profitable division of Liberty. There are about 25 million cars on the road with idle SIRIUS receivers. By heavily discounting or giving away subscriptions to used car buyers, Sirius is only adding to their profits. If only half of the free subs convert, it amounts to a huge amount of revenue. What makes Sirius great is CONTENT which is by far the best available anywhere.

    When you subscribe to Sirius, you are like the rancher who feeds his horses top quality oats. There is cost involved, but the finished product is far better than a horse which is fed oats which have already been run through the horses, i.e. Pandora. I remember in the fall of 2011, Rocco was predicting that SIRIUS would fall to $1.00 per share within a few months, and touting Pandora which dropped like a rock. Pandora is coming back, evidently because those who are content to eat horse droppings don't mind listening to commercials and "recycled oats" content.

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