Satellite radio, marketed primarily to automakers, provides 100+ channels of radio programming. Two firms comprise this market--XM Satellite with 1.5 million subscribers and Sirius, with 200,000 users. Bernie Schaeffer, Tobin Smith, and Jamie Dlugosch offer their opinions on these players.
(For more information on the advisors cited below, please click on their photos.)
"After a three-month
period of consolidation we are seeing activity again in the two players in the
satellite radio market--XM Satellite Radio (XMSR NASDAQ) and Sirius Satellite (SIRI NASDAQ), says Bernie Schaeffer,
along with Schaeffer Investment Research analyst Ron
Taylor. "Talk that shock jock Howard
Stern (with 15 million listeners), might move his radio program to one
of the subscription-based satellite providers is all speculation, but
the story has definitely piqued the interest of traders. But
from a sentiment standpoint, the real story regarding both these stocks is
short interest. The current short-interest ratio on XMSR stands at 8.18. This ratio
means that it would take more than eight days, based on the stock's average
daily volume, for all short positions to be covered. And total short interest
for SIRI increased 40% during the most recent reporting period, marking one
of the largest increases in total short interest on the entire NASDAQ last month.
So it appears that the speculative short-selling crowd has decided to wage war with
this group of 'over-valued story stocks.' Typically, these situations run much
further than you would expect. From a technical perspective, both of these
stocks are starting to firm up. They are exhibiting strong relative
strength and approaching their former highs. Both of these names appear to
be attractive opportunities for speculators looking for growth stocks with strong sentiment
and technical backdrops. In our The Option Advisor
newsletter, we are recommendingXM Satellite Radio October 25 calls. The stock is up a whopping 17-fold
off its November 2002 bottom. Strong technicals amid such pessimism
suggests that the stock is far from reaching a top."
Adds Jamie Dlugosch, editor of The
Rational Investor, "Sirius Satellite
Radio enjoys a fairly healthy valuation based on its prospects in a huge growth
industry. With a current subscriber base that is minuscule compared to the size
of the market, investors in SIRI can enjoy watching the company grow into its
valuation. In this case, SIRI's superior programming, including exclusive
contracts with professional sporting leagues, will give the company a leg up on
its competition. Over time I expect the company to reach my target of
$10."
Meanwhile,Tobin Smith, editor of ChangeWave Investing, is also a fan of Sirius. We note that he has
been a long-term buyer of XM Satellite, and has already benefited from the
stock's significant gains. Now he says, "I consider Sirius a buy
recommendation. I believe the next major event will be an announcement
from Toyota to 'go ballistic' in installing Sirius radios in their new cars next
year. I think it's a lock. Toyota has been slow to the game. They need to
centralize on one provider, and I would note that they hate General Motors,
which is a a minority owner of XM Satellite. Add in the fact that SIRI has a
much better retail distribution system, and I now forecast they will overtake XM
in market share by the end of the 2006. These guys have a duopoly in the US with
XM Satellite, and I believe you will see satellite radio coming into the home
and portable players big time next year."
