But Siriusly Folks
Sirius is being held down by the 38,000 $7 and under calls that nobody seems to want to sell. There are virtually no puts above $7 so max pain is very obvious here… The stock could explode out of the gate next week but not until all the options are cleared.
There are 147,000 Jan ’06 $7.50 calls and another 100,000 $10 calls for Jan on SIRI. At $10, the market cap of the company would be about $14Bn with no earnings – still in better shape than GM!!!
XM’s market cap is only $6.4Bn with 2.5x SIRI’s sales and 1/2 the losses per share. As a Stern fan I try not to play this space because, despite all these facts, I still have a gut thing that tells me to go with Sirius and my brain says no way…
I think in 10 years it will be like comparing with a friend who bought Comcast vs your Time Warner back in the 70′s – Who cares, you both made a boatload of money!
Clear Channel is worth $17Bn and they give the shows away, so I think you need to look at Comcast’s $57Bn market cap to get an idea of what 50M radio subscribers will look like in 10 years.
So from a chart technical standpoint with no thinking about any annoying facts about the company it looks like this artificial hugging of the $7 option line will lead to a bust out right past the recent high of $7.61 but with serious danger signs at $8 when people start weighing in with “how can they be worth $10Bn.”
Look for a pullback at $8.50 but if you are not out by then you are being way to piggy anyway. This may also be a huge “buy on the rumor, sell on the news” situation so I wouldn’t want to be too long on this. If the company gets to 10M subscribers (3x current) who pay $15 per month that’s $1.8Bn a year.
Comcast has gross margins of over 20% so let’s say Sirius brings home $400M for investors, that would be, at a p/e of 30, around a $12Bn cap for SIRI. If growth looks good after 10M subscribers, we could see a p/e of 50 but keep in mind that DISH, who slowed down and is in virtually the same business, has a p/e of 8 on $8Bn in revenues. Of course, Dish doesn’t own thier content but I think somewhere between 8 and 50 is the real p/e target of Sirius long term.
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