Let's get one thing straight: Buying in with a band of fanatical crazies can still pay off huge. You don't get any more rabid than Apple Computer (Nasdaq: AAPL ) bulls. Check that chart out over the last few years. Even around Fooldom, nearly a dozen years ago, Iomega (NYSE: IOM ) proved to be a lucrative battle cry. It's not a matter of broken clocks being right twice each day. It's that a slow clock will never be right.
There is nothing wrong with passion, Alyce. It's only misplaced passion that will do you in.
You know, like this obsession with Oprah as a driver. I think it's great for XM (Nasdaq: XMSR ) . I think it's great for satellite radio, too. That's because fresh content keeps migrating to the medium. XM has Oprah. OK. Sirius (Nasdaq: SIRI ) has Martha Stewart. OK. Every deal makes the platform that much more relevant. Ninety-seven percent of the country doesn't have satellite radio yet, and every deal makes it that much more indispensable.
But we really can't compare these deals to the Howard Stern contract. It's like the old anecdote about the chicken and the pig arguing over who is the more important breakfast component. The chicken argues that eggs matter more because they take up a larger part of the plate than the ham. Then the pig argues that to the chicken, it's a contribution, but to a pig, it's a total commitment.
Stern is going "whole hog" here. Fans of Stern have little choice but to turn to Sirius. It's a total commitment, and you already saw the consumer response in the December quarter with Sirius coming out on top in new additions. Just wait until the March quarter, now that Stern is actually on Sirius. This little piggy went to the market, Alyce.
That's right, Oprah. I'm calling you chicken. How about that? Where's my car?
Alyce alluded to the valuation of Sirius. Sure, 40 times trailing sales (through September) seems steep, but Sirius is fetching just 13 times this year's projected revenues. Yes, it's growing that quickly. Still rich? Take it out five years, when the company will be immensely profitable. Today's price is less than two times that top line. High acquisition costs? That will actually decline as the base of net additions grows and the company relies on the more attractive retail market. Debt at $1.1 billion? I'll take that and raise you the $934 million in cash resting a few line items higher on the same balance sheet, my friend.
A lot can happen between now and then, a lot of that being pretty darned good. So where is a rule breaker like satellite radio in general or Sirius in particular going over the next few years?
To the moon, Alyce.
To the moon.
Think you're done with the Duel? You're not! Go back and read the other three arguments, then vote for a winner.
Longtime Fool contributor Rick Munarriz has been a Sirius subscriber since 2004 but does not own shares in any of the companies mentioned in this story. T
he Fool has a disclosure policy. He is also part of the
Rule Breakers
newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
RSS Headlines
Fool UK