Satellite Sees Boost
The natural question happening at this point is why did this sharp upturn happen? As with anything there can be many answers and theories. Theories from FCC votes being leaked to shorts covering for the weekend, to market manipulation are all ideas that people seem to love to discuss.
Personally, I look at the upturn in both Sirius and XM and see something interesting. Sirius was up more than XM. Thus, the arbitrage spread actually got larger in the last couple of hours of the day. This activity could give legs to the theory that shorts are covering. One popular arb play if you felt the merger would pass was to go long XM and short SIRI.
I also consider the fact that the Draft Order has been issued, and that there is speculation that we could begin to know commissioner stances by mid next week.
Combine these two theories, and it is possible that we are onto something. How much upside this can deliver is yet to be seen, but Monday will be a day that investors in the sector may want to pay attention.
Even with a nice jump late Friday afternoon, neither equity reached levels of the trading channel that existed for most of the merger process. Thus, satellite radio is still in a bit of “no-mans land”. Below the trading channel and above the $1.75 price target of Wienkes. If the equities hold their ground, we may not see a new report from the Goldman Sachs analyst, which was something I was looking for to help establish a bottom. Without an established bottom, there is still some trepidation out there that investors may want to consider.
Over the next few days, some information will become available that may also impact SDARS. OEM’s will be reporting June sales early next week. One factor that has satellite watchers nervous has been the continued downtrend in vehicle sales. If a bad trend continues, satellite investors will want to be on top of the news as it begins to come out. Not only will the June sales represent a month, but Q2 as well. With 6 months now gone, this would be the time that analysts would be sharpening their pencils and going through their assumptions. Some analysts have already projected that the retail channel for Sirius will be better than previously assumed. Solid news on the OEM channel will be a focus now as well.
Sector watchers should follow FCC activity, the OEM numbers, the arb spread, as well as the trading volume. Things could be ready for a change, and now is not the time to take your eye off of the ball no matter what your investment strategy.
Position – Long Sirius, XM.
XM started the ramp first @ 1:40 +/- PM. Sirius took off at 2:10 PM and added to it’s gains from about 3:45 PM ending 15% up compared to XM’s 10 +/-. In fact it appears the IPOD news drove Sirius, not short covering per se.
Tyler, I believe you are becoming somewhat out of touch on what is exactly going on with the merger. You have not commented on the Iphone/Sirius connection, which I believe drove both stocks higher on Friday. You continue to focus on arb trading. This is beyond arb trading and short covering. It is purely stock manipulation and if you did not see it in AH’s on Friday, then I think you should be writing about something else other than stocks.
The fact that there is an app for a hacked iPhone that can get Sirius online isn’t news. You have to be kidding me, right?
Something is happening on Monday related to the merger, that is all. Probably another commissioner’s vote has leaked and will be public Monday.
Ace,
I rolled 100% into XMSR after Martin’s support and after looking at the OEM landscape which makes me think XM may start to clean Sirius’s clock ( their partners are taking share in auto while retail has stopped for all intent and purpose). People are missing the spread on this 4.6 which is now 18% as of close.
Sinvestor…It’s so hard to be everywhere in this market and technology that I have sympathy for TS who’s site provides great info on satrad… you almost have to be a trading wonk-specialist as I think you and I are to get the trading side.
I have never seen a real “arb” play in this. I still don’t. People stayed away from XMSR when it looked like SIRI would be the victor without a merger. Now, there seems to be no reason to own Siri (at least for me). Merger and momentum are now on XMSR’s side… through no talent of their own management’s making either.
siriusinvestor….
I saw the news on the i-phone hack. While I thought it was “neat”, I did not repeat the news because it is something that simply was not a driver of what happened in my opinion.
An official partnership would be biger news that would drive the stock.
plowboy, are you kidding me. That news about the I-phone was out at least a day before SIRI stock went up. A jump in a stock always happens before the actual news hits, sometimes just before or a few days before, but I have never seen it **START** to go up after, it has always been before.
As for XMSR starting to get the upper hand on SIRI you are wrong there to. When did that start it certainly was not last quarter. As for retail falling off yes that is correct mostly for XMSR, they are the ones that have taken it in the ass on retail, I have yet to see SIRI lose any net subscribers in a quarter unlike XMSR who started that kind of trend last year. While SIRI YOY retail numbers are starting to level off, XMSRs have continued to fall. As a matter of fact if XMSR was doing as well as SIRI in retail, analyst would be alot more optimistic in that area. It is after all XMSR numbers in that area that are now bringing that down not SIRI anymore. By the way I personally would rather have the retail channel, making up the difference in the OEM channel especially sense the profit margin is better. I tell you what, why dont you get back to me on this, when XMSR finally gets at least 1 quarter of improving market share over SIRI. I have been waiting for over a year and half, I guess another year and a half wont matter.
I also find it interesting that only XMSR has said that the retail channel is not that important anymore. Where SIRI still seems to think it is important.
Tyler, I have said before that I thought that by end of Wed or early Thur, we would see the stock if not at least stablize it would start to come up. I had also thought it would get to the 2 to 2.05 range in a day or 2, because there would be alot of selling pressure on it till thur morning due to margin/house calls, then go up due to it being over sold (correcting in SIRI and in the market in general). I however would not think it would go that high that fast, 2 hours just seems to odd to me. I believe if it were shorts covering we would have seen it get to at most 1.98 to 2.01 not 2.1. I think there is another reason, such as a commissioner such as Tate and not Mcdowell, being found to be for the merger. I say that because as you were saying on Sirius Buzz Radio people are looking for concrete news on the merger and Tate is more concrete then Mcdowell(most think he is for it already anyway). While .27 is not a big jump it is alot more then I would expect on a short covering, IMO.
I agree. The Iphone news would not move this stock by an extra 18 million of shares over the average. Something leaked or someone(s) wants this stock. Tyler it’s coming to the end this week or next. We will have our decision (fingers crossed).