Sirius (NYSE:SIRI) has been a cheap stock over the years, unable to get the traction necessary to break out of the single digits. But while the shares are still under $10, Sirius stock has enjoyed a good run over the last decade.
Sirius stock is up 53% over the past three years, 102% over the past five years and 1,000% over the past decade!
However, anyone who bought Sirius stock during the dot-com bust would still be losing money.
Regardless of what the stock did 20 years ago, we’re focusing on what it can do going forward. That brings up the question of whether Sirius stock is a good purchase under $10. Let’s take a closer look at this issue.
Valuing Sirius Stock
When SIRI reported its third-quarter earnings on Oct. 31, the company delivered solid results. While its earnings of 5 cents per share missed analysts’ average expectation by a penny, its revenue of $2.01 billion jumped 36.7% year-over-year and topped the average estimate by $30 million.
Most of that big revenue jump came from the company’s acquisition of Pandora. Excluding the Pandora deal, its sales rose 7% YoY.
It may surprise some investors to realize the size of Sirius. Despite the single-digit price of Sirius stock, the company is valued at roughly $30 billion and is forecast to generate more than $7.75 billion of revenue this year.
If SIRI delivers Q4 results that are in-line with analysts’ average estimates, its revenue would be up about 35% YoY, again thanks to the Pandora acquisition. But Q3 was interesting, as the company’s underlying business showed better-than-expected strength.
The SiriusXM business added more than 300,000 net subscribers, while Pandora’s ad revenue grew 8% YoY and hit a new high of $315 million of revenue. SIRI raised its 2019 revenue, EBITDA and free cash flow guidance, and now expects the latter figure to hit $1.625 billion.
Sirius stock could be impacted by the company’s enormous list of tough competition. Apple (NASDAQ:AAPL) Music, Spotify (NASDAQ:SPOT), Amazon (NASDAQ:AMZN) Music and Google (NASDAQ:GOOG, NASDAQ:GOOGL) via Music and YouTube are just a few of the juggernauts in streaming music.
But if Sirius can continue to gain subscribers for its legacy platform while growing Pandora, SIRI stock could rise above its current levels.
Looking into 2020, average estimates call for its revenue to grow roughly 6% to $8.24 billion and its earnings to jump 30% to 26 cents per share. While Sirius stock is trading at 26 times that earnings estimate, it’s clear that SIRI’s underlying business has momentum, particularly if it can exceed these estimates.
Trading SIRI Stock
The momentum of the underlying business could be a huge catalyst for Sirius stock price, particularly with SIRI stock consolidating in a tight range near its 2019 highs.
SIRI stock may be up 32% from its May lows, but keep in mind that the stock is up just 13% over the past 12 months. It could have more room to climb if the company can meet analysts’ growth expectations.
I love how Sirius stock tends to go from one level to the next on the weekly chart. In other words, it rallies up to its resistance area and consolidates beneath it. Once it surpasses the resistance area, the area becomes support. Check out how Sirius stock broke over resistance (depicted by the purple line) near $6.20. The stock then used this area as support during a pullback earlier this quarter.
The shares are now consolidating just below $7, as Sirius stock trades inside the September 2018 gap (depicted by the blue box). Bulls hope that SIRI stock can eventually push through $7, putting $7.20 and $7.50 on the table.
As discouraging as it would be to see Sirius stock lose uptrend support (depicted by the blue line) and fall under the 10-week moving average, that would still be okay as long as the shares don’t fall below their $6.20 support.