A rocket burns more fuel in the first 30 seconds of a launch than it does in the subsequent 30 seconds, and even less in the third 30 second segment of a flight. For Sirius XM investors, the recent run up to new highs may seem like the company has finally gotten to a point where the gravity that was holding it down is finally being overcome. They key to this happening is in company fundamentals, positive news, and simply the winning of the war of attrition. Sirius XM has proven that it is a survivor. The company staved off bankruptcy, regained NASDAQ compliance, demonstrated that they can thrive with mediocre auto sales, presented a fantastic Q2, and will soon announce another positive quarter.
By making it through these difficult spell SIRI burned a lot of fuel. The good news is that the moves begin to get easier. With each success, the nay-sayers have less gravitational influence. Simply stated, Sirius XM has not run out of fuel and has plenty more to continue their journey.
SIRI has answered most every criticism regarding their business model. They have the best content, the best delivery system, and the foundation to continue. They generate enough revenue to survive, service their debt, and even grow. Seeing all of this come together has been a welcomed addition to the drama that is Sirius XM Radio. Yes, there are still critics, but it is becoming a narrower field with each passing day, week, month, and quarter.
Certainly there will be hype in the coming weeks. When the company signs Stern (and I feel they will), there will be a bump. When they announce their subscribers (should be any day now) there will be another boost. When they deliver their Q3 call there will be more positive impact on the stock. There are other upcoming events as well which include addition to another Index Fund (NASDAQ 100) and the launch of their latest satellite (next month). All of these will continue the momentum. All of these events impress both investors and the street.
As with anything, there should be some cautions. They excitement could bring a rise in stock price faster than the positive events really warrant. Investors during this run should be cautious of this. In my opinion we want to see steady reasonable growth rather than a massive spike that falls apart. With all of the positive news that is anticipated it can become easy to get caught up in the moment.
There is a distinct possibility, depending on the timing of announcements, that Sirius XM could take out most analysts 2011 price targets. The big question is where the equity will settle down after all of the news and return to a more tempered style. When this happens, the shift will move to ever improving financials. Some want to be hyper critical of analysts that deliver bearish estimates, but in some ways these analysts provide SIRI with additional fuel. By beating even the most bearish detractors time and time again, Sirius XM becomes an equity that investors are trying to catch and not the victim of yet another trading range.
Yes, the stock will still have its ups and downs. The good news is that the trend line is pointing upward and Sirius XM has fuel to feed that trend.
Position - Long Sirius XM Radio