Why Sirius XM Is Worth Tuning Into

by Marc Bastow | August 13, 2012 7:30 am

Being an investor means trying to never say you’re sorry — and freely admitting that on occasion you’re simply a dope.

Consider me the latter when it comes to Sirius XM Radio (NASDAQ:SIRI[1]).

Not too long ago, let’s say around mid-2008, I suggested to a friend that at 14 cents per share (and that was already up about 5 cents per share from when I first noticed), Sirius might be a really good place to take a flyer and snap up lots of shares for not much cost.

My friend did so, and, of course, I didn’t follow my own advice. He outsmarted me with that purchase, but decided to sell when the shares crossed over $1. That was in February, 2010.

Shares are now nearly touching a 52-week high of $2.51 per share, and OH! what a mistake on my part.

Despite the confidence I had in my investment advice, my concern back then was that Sirius XM was on the verge of an epic financial collapse, and perhaps the satellite radio model wasn’t going to make it long term.

Wrong on both counts.

On the satellite radio model side, Sirius XM broadcasts more than 135 channels of commercial-free music, premier sports, live news, talk, comedy, entertainment, traffic and weather to more than 22 million subscribers (of which I count as an enthusiastic fan). This makes Sirius XM one of the largest subscription media companies in the U.S.

If you have an interest, chances are Sirius XM has the content: sports, music, talk radio, news, weather, traffic, humor, more sports and headliners like Oprah Winfrey, Martha Stewart, Christopher “Mad Dog” Russo and, of course, Howard Stern are all on board.

Sirius XM is available everywhere[2]. Because it’s satellite-based, the network covers the entire U.S. without having to worry about reception or the “can you hear me?” problems associated with cell-phone towers that occasionally plague wireless providers like Verizon (NYSE:VZ[3]) and AT&T (NYSE:T[4]). So you can listen from anywhere: home, office, boat, and most important, your car.

Indeed, buying a new car from GM (NYSE:GM[5]), Ford (NYSE:F[6]), Honda (NYSE:HMC[7]), or virtually another other badge out there means Sirius XM will be offered free on a trial basis.

Do you have an Apple (NASDAQ:AAPL[8]) iPad, iPod, or iPhone? What about a Google (NASDAQ:GOOG[9]) Android device? A Research In Motion (NASDAQ:RIMM[10]) BlackBerry? No problem: Sirius XM programming is available on each one using a Sirius XM Internet Radio App.

Still, the financial peril I had worried about was real. The company was literally dying just four short years ago. Revenues were growing slowly, but earnings were in the tank, with big losses in both 2008 and 2009, with the 2009 hit just under $500 million.

But the situation was more dire than just losses. Sirius XM faced the real possibility of bankruptcy because it was running out of cash needed to pay off debts and deflect a takeover effort by Dish Network (NASDAQ:DISH[11]). Dish Chairman Charlie Ergen had bought up Sirius’s $175 million debt obligation, pretty much trying to buy his way into an ownership position.

Sirius was saved by Liberty Media (NASDAQ:LMCA[12]) Chairman John Malone, who pumped $530 million into the company in exchange for 40% ownership. Liberty Media is still around, with what’s now a 45.2% stake in the company, and Malone may be looking for more down the road[13]. But that’s the price of staying alive.

Revenues started climbing again, and earnings are now following. Second-quarter 2012 revenue was $837 million, above Street estimates, and adjusted EPS of 2 cents per share was on target with estimates. Better yet, Sirius estimates that it will add 1.6 million new subscribers[14] to its existing 22.9 million subscribers by the end of 2012.

Sirius still has a ways to go[15] before it’s truly out of the woods. I suspect the Malone factor will come into play for a long time to come. But I sure wish I got in last time around. Maybe I won’t wait any more.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he is long VZ and AAPL.

Endnotes:
  1. SIRI: http://studio-5.financialcontent.com/investplace/quote?Symbol=SIRI
  2. Sirius XM is available everywhere: http://investorplace.com/2012/08/internet-radio-owns-the-home-but-sirius-rules-the-road/
  3. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ
  4. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  5. GM: http://studio-5.financialcontent.com/investplace/quote?Symbol=GM
  6. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  7. HMC: http://studio-5.financialcontent.com/investplace/quote?Symbol=HMC
  8. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  9. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  10. RIMM: http://studio-5.financialcontent.com/investplace/quote?Symbol=RIMM
  11. DISH: http://studio-5.financialcontent.com/investplace/quote?Symbol=DISH
  12. LMCA: http://studio-5.financialcontent.com/investplace/quote?Symbol=LMCA
  13. may be looking for more down the road: http://investorplace.com/2012/05/liberty-media-wants-full-control-over-sirius/
  14. add 1.6 million new subscribers: http://investorplace.com/2012/08/sirius-xm-boosts-2012-outlook-shares-rise/
  15. Sirius still has a ways to go: http://investorplace.com/2012/05/ignore-the-pundits-stay-away-from-sirius/

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