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Publication: "CNN Money"
Publication title: "You can be Sirius: Satellite radio is a good bet"
Publication Date: 5/1/2012
Brief Summary:

The author seems to be firmly entrenched in Sirius XM Radio's (SIRI) bullish camp, citing the company's better-than-expected first-quarter revenue rate right out of the gate. While the article points out that SIRI still sits far below the record highs it achieved in 2000, the stock has managed to bounce back after nearly flatlining in early 2009. In fact, analysts now expect the company's profits to grow at a rate of about 20% each year, according to Maxim Partners' John Tinker.

The piece goes on to note that advertising -- considered "a far more fickle revenue stream than monthly fees" -- makes up a mere 2.4% of SIRI's sales. What's more, the company's customer base rose to a record high of 22.3 million subscribers in the first quarter, even after price increases. Given SIRI's vast content offerings, the author suggests that the price hikes were justifiable. SIRI has also inked deals with a number of domestic and Japanese automakers to have its programming pre-installed -- a potentially profitable move, considering the recent rise in auto sales. The article does caution that the radio darling is currently embroiled in a dispute with Liberty Media over the controlling stake of the company, which could postpone any potential stock buyback plans. Still, the author concludes that with its growing clientele, SIRI should continue to come out on top, barring any major economic declines.

Contrarian Takeaway:

SIRI has certainly displayed some technical prowess lately, having advanced by more than 15% year-to-date. On the charts, the stock continues to trade above support at its 20-month moving average -- a trendline it has not breached, on a monthly closing basis, since December 2009.

Even so, the equity is still surrounded by a cloud of pessimism. Presently, SIRI's May and June series of options carry a host of put open interest. Specifically, the May and June 2 strikes hold peak put open interest of around 4,100 and 5,700 contracts, respectively. This area could translate into an additional layer of options-related support down the road.

Meanwhile, although short interest on the equity fell by 7.4% during the last two reporting periods, these bearish bets still account for nearly 8% of SIRI's available float -- or more than four days' worth of pent-up buying demand, at the stock's average pace of trading. This suggests that the security could still stand to benefit from a short-covering rally, which would provide a tailwind for SIRI.

Last but not least, although five of the nine analysts following SIRI have issued a "strong buy" endorsement, the remaining four have doled out "hold" or worse ratings. Moving forward, this leaves the door open for future upgrades, which could give the stock an additional boost.

Taking into consideration SIRI's technical strength -- as well as its latest earnings report and subscription growth -- the skepticism lingering toward the stock seems unfounded. Should the company continue on its current path, the equity's bullish bandwagon could become a lot more crowded.


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