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Sirius XM Radio Picking Up a Little Static (SIRI)

Sirius XM Radio (NASDAQ: SIRI) stock declined for the third consecutive day on less than its average daily volume for the last three months. The stock ended the day down four pennies, settling at $1.89 with just under 39 million shares exchanging hands. Sirius shares traded in a seven-cent range during the session. After early morning weakness the stock rallied in the afternoon to finish within a whisper of the day’s high.

Two months ago, Sirius hit a new annual high when it traded at $2.41. The stock had steadily marched higher from a fifty-two week low of $1.27 at the beginning of October. Sirius shares are currently trading 20% below the high mark set in April.

Sirius XM Radio is a familiar company to many. The company provides radio programs to subscribers that include sports, business, news, talk, and music of every genre. Sirius distributes satellite radios for use in a wide range of locations from cars, boats, and homes. The company’s main distribution channels are through automakers and web based retailers. Except for 2009 when car sales disappeared off the map, Sirius has added more customers with each passing quarter. The company began operations in 1999.

On May 1, 2012, Sirius reaffirmed its guidance for the year and released first quarter earnings that matched Wall Street expectations. Sixteen analysts currently publish opinions on the stock. Average estimates among analysts predict earnings for the year to come in at seven cents. The average recommendation has the company rated in the overweight category with one analyst giving the stock a “sell” rating. Additional highlights from the quarterly conference call came in the form of three questions asked by a writer from the Motley Fool.

  • Sirius sees no evidence of a price hike instituted in January affecting its ability to attract new subscribers or keeping existing customers.
  • The company won in a lawsuit brought by radio personality Howard Stern. A loss would have required Sirius to dilute the number of shares.
  • Sirius directors plan to hold on to their majority stake against a potential takeover by Liberty Media.

Liberty Media controls forty-six percent of Sirius stock. Liberty also holds five out of thirteen board seats. Analysts and investors are speculating that Liberty will eventually take full control of Sirius. Liberty has a forward contract that expires on July 6th to buy an additional 300 million shares of Sirius at $2.15 per share. The Wall Street Journal followed-up on the power struggle. The daily business paper quoted Sirius’ Chief Executive as saying that he did not want to report to a majority stockholder. He added that even Warren Buffet would not be a suitable boss.

Sirius squares off against several competitors for satellite radio customers that include Clear Channel’s (OTCBB: CCMO) iHeart Radio, as well as Pandora Media.

Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email ([email protected]) or his Google+ page (https://plus.google.com/103338576216002376250).

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