Don't Be Aggressive With Sirius XM?

Jim Cramer suggested that a cautious stance is in order for Sirius XM Radio (SIRI 0.80%) during last night's Mad Money show.

"I think Sirius Radio is a slow grower here," he warned.

Cramer sees the shares gradually moving from $3 to $3.50, but he feels that speculators holding out for a pop to $5 will be disappointed. The growth isn't there, he offers.

"Don't be aggressive!"

The problem, naturally, is that Sirius XM investors have been bred to be aggressive. The stock is volatile. It has rallied over the past four years, clocking in as a whopping 60-bagger since bottoming out in early 2009. However, the stock also crashed in the years preceding that run. Volatility cuts both ways.

It's been feast or famine with Sirius XM, and now Cramer is advising investors not to be aggressive? To be fair, Sirius XM's growth has slowed in recent years. Subscriber growth has slowed to the single digits, and that's unlikely to change in the near term. Sirius XM's emergence as a profitable media giant was a validating moment, but that stabilizing turn has already been priced into the shares.

Why shouldn't Sirius XM investors be happy with the 14% return from yesterday's close to $3.50? It's not a bad return. It's not as if Sirius XM is as risky as it was during its dark days of 2009, so it's not as if shareholders should expect a big risk-adjusted return.

However, there are a few things that could send the stock past $3.50 sooner rather than later.

For starters, Cramer is only half-right about Sirius XM not being a growth story at this point. Revenue growth isn't likely to accelerate in the near term, but it's a different story on the way down to the bottom line.

Sirius XM's guidance calls for revenue to climb just 9% in 2013, but adjusted EBITDA and free cash flow are expected to climb 20% and 27%, respectively. This trend will continue given the scalable model. As long as subscriber growth continues, Sirius XM's bottom-line performance should surpass its top-line upticks.

There are also online opportunities. Worrywarts paint Pandora (P) as a threat, but it's also an opportunity, as Sirius XM has introduced some interesting Web-based features over the past year. Receiver-based subscribers have to pay a few dollars more a month for online access, so the online migration is a way for Sirius XM to push its average revenue per user higher.

The two-way nature of cyberspace also opens the door for e-commerce opportunities and more value for advertisers buying ads on the non-commercial-free stations.

The road to $5 was never going to be easy. Sirius XM has a lot to prove if it wants to deem itself worthy of a market cap well north of $30 billion. However, don't tell investors not to be aggressive with Sirius XM. It's the only way that people know how to play the high-beta media giant.