It's all about supply and demand. Always has been, always will be. That is true for Sirius XM stock as well. The recent sell off in SIRI shares can be attributed to supply. The abundance of available shares being sold has met with minimal buy side pressure. This has dropped the price.
A company through its effectiveness can only help to increase or decrease demand of its shares. The example staring us in the face is the recent conference call by Mel Karmazin. Unfortunately, despite many positives, the call helped to increase supply and weaken demand. I don't think it takes a rocket scientist, or in this case an accountant, to see that the intention of the 2009, 2.0 million subscriber addition estimate by Mel was in fact just a low ball estimate, without any basis of fact. Mel even stated that the company was just basically throwing the number out there. The street however, focused its attention on that number.
Some attribute the decline to debt issues coming due next year, but the company did in fact lay out an exceptional plan to deal with the debt, without diluting shareholders. That should be looked on as a positive, yet the street is obviously nervous. Adding to that nervousness, is a sub 1.00 stock price.
What can be done now? There is only one answer. The company must increase demand for its stock, by ignoring the stock. It can only do that by executing its business plan, which puts the Q4 Christmas selling season on center stage. Q4 is historically the strongest quarter for satellite radio and with the new "a la carte" packages and "best of" programming offers being launched this quarter, Q4 looks promising.
This is a new company, only 40+ days old and it should be viewed as such. It is in this quarter that the company has the best chance of increasing demand for its stock, and increasing guidance in future calls.
Investors now have an opportunity to own stock in a company, with 2-3 BILLION dollars in annual sales and GROWING, for under a buck. Are you kidding me? Oil prices are plummeting and lenders have become more liquid in recent days which should boost car sales. The potential for upside surprises from the company has never been better. I think everyone can clearly see that. If we are all aware that the estimates given for 2009 are a low-ball figure, why then place so much importance on the number?
If the company can achieve its desired cost cutting and execute on sales, the stock will rise like a phoenix from the ashes. The growth of the company is real despite many headwinds. As Jim Cramer admitted at the prompting of Mel Karmazin, there is no other stock in the sector he'd rather own. The stock will catch up, but the days of day-trading it are coming to an end, and that is good for long term investors.
Positon: Long SIRI