XM Satellite Radio (NASDAQ: XMSR) shares are trading higher today after the company announced it gained 322,000 new net subscribers during the second quarter, 17% higher than the same quarter last year. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on XMSR.
After hitting a one-year high of $16.44 in November, the stock hit a one-year low of $6.78 earlier this month. XMSR opened this morning at $8.75. So far today the stock has hit a low of $8.69 and a high of $9.02. As of 12:15, XMSR is trading at $9.04, up 48 cents (5.8%). The chart for XMSR looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $6 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 9.9% return in just two months as long as XMSR is above $6 at September expiration. XM would have to fall by more than 33% before we would start to lose money.
XMSR hasn't been below $6.75 at all in the past year and has shown support around $7.25 recently. This trade could be risky if the company's earnings (due out late this month) disappoint, but even if that happens, this position could be protected by the support the stock might find at its year low at $6.80, which is has bounced up from recently.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in XMSR.
The Wall Street Journal reported that after years of rapid grows, many hedge funds are shutting their doors or merging with others, as expansion has dramatically slowed. As a result, the industry is being dominated mostly by big firms, such as Och-Ziff Capital Management Group LLC (NYSE: OZM), D.E. Shaw & Co., and Paulson and Co.
Shares of Ctrip.com International Ltd (NASDAQ: CTRP), China's major Internet travel booker with about 58% of the country's online travel business, have dropped about 30% in the last six weeks alone creating a possible buying opportunity, according to the Wall Street Journal's "Heard in Asia". Travel in China is expected to grow solidly in the long-term and Ctrip.com said it expects revenue to grow 30% for the three months ending June 30 from a year earlier.
In a move that could potentially usher in a new phase in the credit crunch, the Financial Times reported that The Goldman Sachs Group Inc (NYSE: GS) is said to be close to finalizing a plan to restructure a $7B investment vehicle formerly run by Cheyne Capital, a London-based hedge fund.
Some investors shy away from low priced stocks., but Rick Aristotle Munarriz thinks some stocks under $10 have nice growth potential. Here's his list of five such stocks to consider.
Alvarion Ltd. (NASDAQ: ALVR) is currently at $8.98; its development trajectory looks impressive if we take into account the fact that it has gained 53% over the past two months. In addition, its quarterly earnings results and its cash-rich balance sheet point to further growth.
Sirius Satellite Radio Inc. (NASDAQ: SIRI), currently at $2.72, is showing a lot of potential as its subscriber base continues to increase, while reducing its quarterly losses. Munarriz also cites the company's advantages tied to its pending merger with competitor XM Satellite Radio (NASDAQ: XMSR).
Builders FirstSource Inc. (NASDAQ: BLDR) is currently at $7.48, down from $23 two years ago. Despite the fact that the company's quarterly earnings numbers weren't so good, BLRD was able to gain market share and is nicely positioned for a recovery in the next couple of years.
Internet Brands Inc. (NASDAQ: INET), currently at $6.48, is seen as a good investment in the current dot-com world. Last week's $1.8 billion decision by CBS Corp. (NYSE: CBS) to acquire CNET Networks (NASDAQ: CNET) could be a sign that we should consider Internet Brands and its high traffic volume. Internet Brands has several pages that have high advertising potential, and should see this pay off in the future, or lead to a possible buyout by one of the major players.
Natuzzi (NYSE: NTZ) is currently trading at $3.77. The company is facing some trouble related to its declining revenue and profit, but it is has the advantage of a lot of cash on its balance sheet.
Sirius Satellite Radio (NASDAQ: SIRI) reported Q4 and full-year earnings this morning, and I have to say that the company, led by the famous and highly-respected CEO Mel Karmazin, tuned into some good numbers. Revenues for the fourth quarter increased 29%; for the full fiscal year, revenues jumped 45%. The net diluted loss narrowed during the quarter to $0.11 per share versus $0.17 per share in the year-ago period, and for the year, it improved to $0.39 versus $0.79.
Perhaps the best news in the earnings release is the cash-flow situation. The company's free cash flow more than doubled for Q4, coming in at $75.9 million. And, hey, it was positive, which is important to note, since this company has sacrificed free cash over the years to invest in its platform. In fact, management noted that, for the first time, the second half of the year saw positive free cash flow (equal to $8.1 million for the period). And subscriber growth was impressive -- the company gained almost 2.3 million listeners, and it ended the year with 8.3 million subscribers. People gravitate toward the various popular brands featured on the platform, which includes shows by Playboy (NYSE: PLA), Jamie Foxx, and, of course, the king of all media past, present, and future, Howard Stern. There's also a lot of sports programming to add value for subscribers, as well as an upcoming slate of health programming called "Doctor Radio."
So, why does the stock trade in the low single digits? Why is it priced so speculatively? For one thing, there is the merger issue with XM Satellite Radio (NASDAQ: XMSR). Until that goes through, investors will have to wait for further guidance on the combination of the two platforms. Also, the market is going to want to see some consistent reports of positive net income on a GAAP basis to become really excited. I like the numbers currently associated with Sirius, and I think it may offer some upside potential for risk capital. As for myself? I'm not inclined to play it just yet. I'd rather see some technical strength assert itself before jumping in.
XMSR and SIRI announced on 2/20/07 a merger of equals. XMSR shareholders will receive 4.6 SIRI shares for each XMSR share. The FCC is expected to decide on the merger before the year's end. XMSR December 12.5 straddle is priced at $2.35. XMSR January option implied volatility of 143 is above its 26-week average of 66 according to Track Data, suggesting larger price risks.
SIRI December 3 straddle is priced at 50 cents. SIRI January option implied volatility of 97 is above its 26-week average of 63 according to Track Data, suggesting larger price risks.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
XMSR and SIRI announced on 2/20/07 a merger of equals. XMSR shareholders will receive 4.6 SIRI shares for each XMSR share. The Federal Communication Commission (FCC) is expected to decide on the merger before year end. XMSR December option implied volatility of 122 is above its 26-week average of 61 according to Track Data, suggesting larger price risks.
Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite RadioHoldings (NASDAQ: XMSR) have finished the day down 4.29% and 5.53% respectively following a downgrade to Neutral from Buy at UBS. UBS analyst Lucas Binder lowered his FY 2008 loss per share estimates for Sirius to $0.42 from a $0.40 but upped the price target to $3.90 from $3.75. XM fared a little better as Binder increased his estimate of loss per share to $1.61 from $1.68 and moved his price target to $16 from $15. The analyst believes the current stock prices reflect most of the fundamental upside.
Well, some investors may look at today's declines as an opportunity to get into the stocks. I wouldn't. It may be worth nothing that while both radio companies are valued nearly always similarly, many favor Sirius, saying it can only come out a winner regardless of how the dice rolls on the proposed merger of the two. Should the merger go through, all the better; if it doesn't, then Sirius is the faster growing and the better positioned one of the two.
MOST NOTEWORTHY: The process control sector, R.H. Donnelley, Vonage, Coca-Cola Enterprises and Transocean were today's noteworthy downgrades:
Baird reduced estimates across the board in the process control sector due to lower expectations for North American industrial and residential construction. The firm downgraded Roper Industries (NYSE: ROP), Regal-Beloit Corp (NYSE: RBC) and Baldor Electric (NYSE: BEZ) to Neutral from Outperform and AO Smith Corporation (NYSE: AOS) to Underperform from Neutral.
Goldman downgraded shares of R.H. Donnelley Corporation (NYSE: RHD) to Neutral from Buy after the company updated its 2007 guidance to reflect deteriorating trends in local advertising.
Vonage Holdings Corp (NYSE: VG) was downgraded to Sell from Hold at Soleil due to liquidity concerns.
Coca-Cola Enterprises (NYSE: CCE) was downgraded to Hold from Buy at Deutsche Bank on valuation and mixed near-term trends.
Transocean Inc (NYSE: RIG) was downgraded to Hold from Buy at Gabelli. Even though the deepwater market continues to be strong, the firm is concerned regarding the continuing weakness in the jackup market as well as the limited upside potential due to the company's ships being in use through 2009.
SIRI is recently up $0.22 to $3.53, over 6%. SIRI and XMSR announced on 2/20/07 a merger of equals. XMSR shareholders will receive 4.6 SIRI shares for each XMSR share.
Cowen says: "We expect FCC approval before Dec. 4, the end of the FCC review period. We believe approval as early as Oct. is possible. Maintain Outperform on both XMSR & SIRI."
XMSR-SIRI arbitrage premium spread is at 12%. Mel Karmazin is CEO of SIRI.
XMSR December option implied volatility of 68 is above its 26-week average of 51 according to Track Data, suggesting larger price risks.
XM Satellite Radio (NASDAQ: XMSR) volatility up; Arbitrage spread tightens into FCC decision.
XMSR is recently up $1.07 to $14.69.
SIRI October option implied volatility of 71 is above its 26-week average of 53 according to Track Data, suggesting larger price risks.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) is higher this morning and has climbed recently as current investor buzz is that the merger with Sirius (NASDAQ: SIRI) looks more and more likely to succeed. Analysts have said the Department of Justice could make a ruling on the merger within the next month, and they believe there is a better than even money chance the merger will be approved. If you think the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on XMSR.
After hitting a one-year high of $17.70 in January, the stock has been shaky all year as investors await firm news on the status of the planned SIRI deal. XMSR opened this morning at $13.32. So far today the stock has hit a low of $13.26 and a high of $13.64. As of 10:50, XMSR is trading at $13.55, up $0.35 (2.7%). The chart for XMSR looks bullish and steady, but S&P gives the stock its lowest 1 STAR (out of 5) strong sell rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $10 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 16.3% return in just 5 months as long as XMSR is above $10 at January expiration. XM would have to fall by more than 26% before we would start to lose money.
XMSR hasn't been below $10 by more than a few cents since 2003 and has shown support around $11 recently. This trade could be risky if the merger is not allowed, but even if that happens, this position could be protected by the strong support the stock formed just above $10 over the last year.
After hitting a one year high of $17.70 in January, the stock has slipped quite a bit, settling in just above the $10 mark with recent resistance around $12. XMSR opened this morning at $11.43. So far today the stock has hit a low of $11.37 and a high of $11.94. As of 11:05, XMSR is trading at $11.79, up $0.30 (2.6%). The chart for XMSR looks neutral and improving slightly, while S&P gives the stock a very negative 1 STARS (out of 5) strong sell rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $10 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just 2 months as long as XMSR is above $10 at October expiration. XM would have to fall by more than 15% before we would start to lose money.
XMSR hasn't been below $10 by more than a few cents at all in the past year and has shown support around $10.90 recently. This trade could be risky if the Sirius merger falls through, but even if that happens, that decision is not expected until early in 2008.
Word is that there's more than one bid out for the satellite radio company. We know about the merger agreement with Sirius Satellite Radio Inc's (NASDAQ: SIRI), so who's the other party? Or, is there another party? Some are convinced it's just talk. No names are even floating around. But for XM to walk away from Sirius would cost them a $175M break-up fee. They'd have to really be serious about another offer to do that.
In May, Robert L .Chapman of Chapman Capital, the "activist investor", said Building Materials Holding Corp. should consider selling all or parts of itself. Then he upped his stake to 8.1% in the residential construction services provider. Now comes word that the company may have hired, or be in the process of hiring, a strategic advisor.
XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) opened at $10.67. So far today the stock has hit a low of $10.62 and a high of $10.90. As of 10:55, XMSR is trading at $10.89, up $0.28 (2.6%).
After hitting a one year high of $17.70 in January, the stock has stumbled down to near its year-lows over the past six months. The FCC issued a public notice Friday seeking comment from the public on the proposed merger between Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio Holdings. Given that the FCC generally tries to finish its review of mergers within 180 days, this means that there could be a potential decision from the FCC by the end of 2007. Recent technical indicators for XMSR have been neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $10 range. XMSR hasn't been below $10 since October and has shown support around $10.40 recently. This trade could be risky if the Sirius merger gets the ax, but with today's news, that kind of announcement shouldn't happen until well after July expiration.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls a position in XMSR or SIRI.
One stock this Fly has been plainly wrong in recommending has been Sirius Satellite Radio Inc (NASDAQ: SIRI). After dropping from $8 per share down to $4, it looked worthwhile bottoming fishing in this still emerging industry. However, while recommending for investors to jump into this stock, the decline did not stop as subscriber growth targets were missed for both Sirius and its main rival XM Satellite Radio Holdings Inc (NASDAQ: XMSR).
However, this week, it appears the negative view associated with this industry may be subsiding. Sirius announced yesterday that Morgan Stanley committed a $250 million term loan for the Howard Stern broadcaster. Proceeds will be used for general corporate purposes.
This follows an upgrade from Bear Stearns' Andy Peck on Monday from Peer Perform to Outperform with a $4 price target. Peck's price target assumes no deal with XM. So it is a real bare bones price target.
Another positive coming in 2008 could be the broad installation of satellite radios in OEM car manufacturers, offsetting the weak acceptance of satellite radio in the retail distribution network.
All told, the vicious cycle that has hit the satellite radio industry appears to be subsiding. Below $3.00 per share, Sirius is worth a shot: it has customers, revenue and a lot a programming. The worst case scenario could be a terrestrial radio company acquires it.
Crain's NewYorkBusiness.com has told me some amazing news. Today, at 5:00 pm EST, the all-talk radio station 92.3 WFNY will change back to its historic rock roots as WXRK, or K-ROCK, according to sources at CBS Radio (NYSE: CBS).
The move couldn't come fast enough.
Its the first sign of change under new CEO Dan Mason, who replaced Joel Hollander last month.
The move back to rock music ends the all-talk format when Howard Stern went to Sirius Satellite Radio (NASDAQ: SIRI) at the end of 2005. WFNY has struggled from day one. The station had a paltry 1.3 share of the audience during the 2007 winter quarter, the same a year ago.
Opie & Anthony, currently serving a 30-day suspension at XM Satellite Radio (NASDAQ: XMSR), will get to keep their morning drive job on the new (old) WXRK. After 9 am, the station will return to its rock roots.
Just minutes ago, Opie from the O&A was the first live voice listeners heard, as Guns N' Roses' "Welcome to the Jungle" played in the background. The station officially kicked off the format change playing one of Nirvana's greatest hits, "All Apologies."
XM Satellite Radio (NASDAQ: XMSR) shares are trading higher today after the company announced it gained 322,000 new net subscribers during the second quarter, 17% higher than the same quarter last year. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on XMSR..gif){kind=logo}
Some investors shy away from low priced stocks., but Rick Aristotle Munarriz thinks some stocks under $10 have nice growth potential. Here's his list of 
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