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Monday, February 6, 2023

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Trade of the Day – Siri

I was less than enthused with Mel Karmizan’s appearance on Mad Money yesterday but happy with the way Cramer almost cried when he hugged Mel. I think something big is up and Mel did Cramer a huge solid by coming on his live show.

Usually I like my trades of the day to be very short term so that we can get very real cash back in the bank asap but SIRI may be one I want to hold on to.

The stock is just coming off being oversold and looks like it will, at worst, follow its long term trendline up for some time. On the 10 year chart, a look at bi-weekly candles indicates that this stock is just about to pop at least back to its $9 high of last year.

The Howard Stern hype machine will add fuel to the fire, especially on slow news days. Although operating at a loss, it will be flat to last year with sales climbing 400% from last year.

The company has $1Bn in cash but also $1Bn in debt but Mel says they will be cash positive by the end of next year and you just don’t make that kind of stuff up on national TV if you want to stay out of jail! Also, when Mel says profitable, that includes Howard’s $100M show expense.

Interestingly, the company generated $233M in cash last quarter, even as they reported a loss of $180M. These guys made such a huge upfront investment in satellites and such that they won’t be paying taxes until 2010.

Speaking of investments, this company IPO’d around $5 in 1995 and ran up to $49 during the .com craze then crashed down to $1 with the Nasdaq mess. If, as Pumba says, you can put the past behind you, you essentially have the opportunity to buy into this company at the IPO price at precisely the time it is about to reap the benefits that rocketed the stock during its first 5 years.

In 1996 people bought the stock with naysayers saying, maybe the satellites won’t launch, maybe the receivers won’t work, maybe people won’t pay for radio…

We are well past all that and, as a testimonial, I can tell you that I haven’t touched my FM car radio since I got my Sirius last Xmas. CMCSA has a market cap of $48Bn and a p/e of 48 while Direct TV (if you think that’s a closer comparison) has a market cap of $18Bn while losing $2bn per year!

With just $500M in profits and a p/e of 30, Sirius should get a market cap of $15Bn which would be good for about $13 a share by the end of 2007 so I will be trading along that conservative path getting out over $8.50 this year, back in at $7, if possible, and back out around $11 next year. Judging by this year’s action, there could be a lot of those trades to make.

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