2-Star Stocks Poised to Plunge: Sirius XM?

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 XM's business and see what CAPS investors are saying about the stock right now.

Sirius XM facts

Headquarters (founded) New York (1990)
Market Cap $6.9 billion
Industry Cable and satellite
Trailing-12-Month Revenue $3.1 billion
Management CEO Mel Karmazin (since 2004)
Chief Content Officer (since 2004)
Return on Capital (average, past 3 years) 9.4%
Cash/Debt $746.6 million / $3.0 billion
Competitors Apple
Pandora Media
Westwood One

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

On CAPS, 18% of the 5,444 members who have rated Sirius XM believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those bears, All-Star MintCoin, brought a specific competitive threat to our community's attention:

Long term this is probably one of the next companies that will lose big when Apple rolls over its turf. Apple does music better (much better) than anyone. What happens when they integrate [Siri voice command] into the steering wheel and give cult users direct access to their docked iphone via voice, which will include the Pandora service? One of those things is they will no longer need to pay monthly for a music service from [Sirius XM].

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Read/Post Comments (8) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On June 14, 2012, at 10:15 AM, 67vair wrote:

    A non threat at best. Read that article yesterday and it won't be bad for Sirius. Actually would help it.

  • Report this Comment On June 14, 2012, at 10:24 AM, EEasyMoney wrote:

    Yep... Pandora and Apple sure are a threat to Sirius. Especially when I want to hear political talk radio, fantasy sports radio, Playboy radio, Howard, live sports, and cruise in and out of 70s or 80s radio in between. But I guess I could give all that up to listen to a free juke box and save the equivalent of four gallons of gas per month.

  • Report this Comment On June 14, 2012, at 10:26 AM, indycolt17 wrote:

    I can only speak for myself, but....I have an iPhone, iPod, iPad, and the capability for Pandora. I keep my iPod connected to my car, which is transferred to the display on the dash...very easy controls. But I find that I'm addicted to Sirius. I'll occasionally switch over to the iPod, but there's only so much music that I can take. Most of my time in the car is spent listening to Sirius, which I don't even consider a music option. Has been like that for years (had XM prior to the merger). I believe Sirius can continue to coexist with Apple and whatever the next attempt at internet radio will be, post Pandora. Probably why Sirius continues to accumulate subs and make so much freakin' money.

    Heck, I even have a large movie and TV show database at home in various devices....and with a Netflix account. But I still subscribe to cable. Call me crazy.

    One final comment. I may be the only one, but I have over a thousand songs in my iPod...but, for some reason, I probably listen to the same 20 to 30 over and over. So in reality, I don't need a lot of song options. Maybe others are like me as well.

  • Report this Comment On June 14, 2012, at 10:34 AM, CaribouPaku wrote:

    18% say underpreform that tells me that 72% say equal or better. So, why all the negative twists all the time. You only are playing into the shorts. This stock is going to skyrocket. Why else would the big investors want it? SAC Capital increasing its stake, Liberty increasing its stake. Come on get with it. Debt is shrinking and revenue is growing. That is what is important. Anybody who knows this product knows it is the best by far.

  • Report this Comment On June 14, 2012, at 10:41 AM, doubting wrote:

    We have heard for least five years that Sirius and XM and now Sirius XM are going to fail. Isn't it time to look at real facts, at reality... and shut up?

    The company has been consistently profitable for the past 30 months. In 2011 it made about $430M in profit, or about 7 cents per diluted share with an abhorrent share count of 6.5B shares (combined liberty's preferred and outstanding). The company's profit margin was almost 15% in 2011.

    In 2012 the company has a strong chance to make 11 cents per share on revenue of $3.3B with profit margin at 20%. Most importantly, free cash flow (money going to the bank) will exceed $700M. These are conservative estimates.

    On the subscriber front, siri added 1.7M last year and will do at least as well in 2012 or may be as much as 2M new subs. This assumption is supported by reality rather than rumors spread by siri bashers. Sales of new autos are likely to increase this year by about 1.5M new cars to reach 14.3M vs. 12.8M last year. On top of that, siri has deals with almost a third (total number about 20K) of all reputable used car dealerships with gross subscriber additions from them projected at 1M already this year (net used car subscriber adds will likely total about 350K). This relatively new phenomenon helps create a sound balance in terms of costs where virtually cost free used car subscriber acquisitions will balance out growing expenses with OEMs. This means that the SAC will stay under $60 or better.

    To make things even better, capex expenses will be minimal for the next five years; programming costs are decreasing about 8% per year due to merger synergies and very strong negotiating position of the combined company; deals with auto makers will get cheaper as well.

    One has to be either ignorant or stupid or both to fail to see all the above and much more. Siri's health is as robust as ever, the company is in a most enviable position today with over 22.3M customers, growth rate is strong, profitability is becoming a dream come true. Conservatively, the company will churn out $1B in cash next year, $1.4B in 2014 and $1.9B in 2015. With today’s cash, this will cover the existing debt almost two times. If siri chooses to pay off its $2.9B debt, about $300M that used to cover interest payments will go straight to the bottom line.

    So, after all this we are going to downgrade the company right before it is starting to prosper. Are you out of your ... mind???

  • Report this Comment On June 14, 2012, at 11:49 AM, Billiardman wrote:

    This article explains why "Fool" was put in the name.

  • Report this Comment On June 14, 2012, at 12:50 PM, Brent2223 wrote:

    SIRI bears seem to struggle with the term 'content' (hint, it doesn't just mean music), always seem to forget that data plans cost money, and don't seem to understand the value of FCF in a paid subscription based business model.

    Watch these SIRI posts, when you see the bears throw out the same arguements over and over it's a pretty big buy sign for me. We should be seeing another 'stern is leaving and SIRI can't survive' acticle shortly.

    I haven't heard one new bearish arguement for years now - planned insider sales? Uncertainty around LCMA? Weak.

  • Report this Comment On June 14, 2012, at 2:01 PM, mwilson234 wrote:

    You are so consistently wrong about Sirius, it is quite clear you have no understanding of this stock, or you are just trying to make it bomb for your own gain. Luckily real Sirius investors have seen you do this for years and are not fooled by your fake take on SIRI.

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Sirius XM Radio CAPS Rating: **