Today was looking like just another one of those post-holiday trading sessions that you can look at the tape and not be able to determine if it was a win, lose, or draw. But then came the last 90 minutes of trading, and suddenly the rally caps came on. This was despite grim economic news, although that is something we just have to get used to for quite some time. Home sales posted a small unexpected increase, but we also saw a 20-year record as far as a jump in housing price declines. Consumer confidence also came in under expectations.
Anheuser-Busch Companies, Inc. (NYSE: BUD) saw a mixed reaction today. It may be getting a buyout offer from InBev in Europe, but Detusche Bank Securities lowered its rating to a "Hold" rating. Shares were only up marginally at $56.90 with a few minutes to the close.
Add Sirius Satellite Radio Inc. (NASDAQ: SIRI) to the list of stocks Wall Street thinks are undervalued. You heard that right.
If anyone wants to take the advice of these analysts, I have a bridge in Brooklyn I would like to sell you. Sirius, which reports earnings next week, is expected to lose 7 cents per share, down from 11 cents a year earlier, according to Thomson Financial. Revenue is due to rise more than 33% to $272.3 million. Their average price target is $3.86, higher than the $2.80 where the stock currently trades. The high target is a whopping $8.
I am still not convinced this is a good stock. Even if the XM Satellite Radio Inc. (NASDAQ: XMSR) merger happens, I don't see the company's prospects improving.
First of all, people aren't buying cars of any sort including those that come with satellite radio pre-installed. Moreover, Apple Inc. (NASDAQ: AAPL) has a device called the iPod. Perhaps you have heard of it.
"Now that many new cars offer input jacks to broadcast media player content through car stereo systems, won't that compete with the commercial-free digital music that makes satellite radio so appealing?" asks Rick Aristotle Munarriz of the Motley Fool.
Good point. Keep in mind that I am a satellite radio subscriber. In fact, I am listening to Howard 100 over the Internet right now. I also like my iPod. I find Howard Stern as amusing as most people and enjoy the commercial-free music such as the Grateful Dead Channel. But I am not sure whether I am going to need both devices in the future.
Until its future is cleared up, investors should avoid satellite radio even if they are fans of Howard.
Either short sellers don't think a merger between Sirius (NASDAQ: SIRI) and XM Satellite (NASDAQ: XMSR) will happen, or they don't believe that the deal will save the two debt-laden companies. Short interest in Sirius rose 20.2 million shares for the period ending April 15 compared with March 31. Total shares sold short hit 157.9 million. Shares short in XM also pushed up 6.3 million to 22.7 million.
The bets may be smart ones. The delay in approving the deal at the FCC has probably made it less likely that the merger will get the green light. A number of members of Congress have loudly protested that the new company would be a monopoly, They reason that a new entity would eventually raise rates sharply because there will be no competition to dampen prices.
The core problem with the merger may be more profound. Subscriber growth rates at the two companies are slowing. Both also have negative net income. At this point, neither company has predicted when it might make a profit.
The biggest burden that the companies have is their debt. Each has over $1 billion in long-term obligation to repay bonds and loans. In a poor credit environment, it is hard to see that paper getting refinanced at better rates.
A new company, even with some cost savings, could have enough debt to sink it.
Douglas A. McIntyre is an editor at 247wallst.com.
There are many that fear the bear hasn't died. Maybe he's hibernating. But if the bear isn't gone, he's at least lost some teeth. In the last hour of trading today, the DJIA was up more than 900 points from its intraday lows seen just last Monday. Despite weaker home prices trends not seen for 20 years and despite an absolutely dismal ugly Consumer Confidence report, the market managed to do well today despite mixed index averages at the closing bell. There was not a single earnings report that can be used for "the focus" that turned the whole market. It looks like there was actually real buying interest coupled by short covering. Here are the unofficial closing bell index averages for today:
DJIA 12,532.60 (-16.04; -0.13%)
S&P500 1,352.99 (+3.11; +0.23%)
NASDAQ 2,341.05 (+14.30; +0.61%)
10YR-TBond 3.492% (-0.03)
Monsanto (NYSE: MON) rose almost 10% to $114.54 after the agriculture giant raised guidance for both Q2 and for fiscal 2008 based on strong seed sales and all other markets firing on all cylinders.
The acquisition -- not a merger -- has been held up for eons by phony arguments that combining these two floundering companies would limit choice. Terrestrial radio and consumer groups have been lobbying hard against the deal, arguing that anything that benefits Howard Stern can't be good for America.
I can't see how the FCC can block a deal that the DOJ approved after examining the deal under and electron microscope. The medium won't survive if the companies stay separate. Even fans of satellite radio admit that it is a niche medium. Then again, so is cable TV.
For me satellite radio is a godsend, particularly on long road trips. I enjoy listening to Sirius while tapping out my blog posts. I particularly like the commercial-free music channels. Regular radio has annoyed music fans by piling on commercial after commercial between tiny slivers of music.
Satellite radio can avoid the fate of BetaMax by continuing to produce high-quality content that people want to buy. It's that simple and that complicated. Freelance writer Jonathan Berr edits the blog Ketchup and Eggs.
Sirius Satellite Radio (NASDAQ: SIRI) ended the year with 8.3 million subscribers, up 38%. The company would probably prefer to have had its merger with XM Satellite (NASDAQ: XMSR) approved, but the subscriber growth is a consolation prize.
Chief Executive Mel Karmazin told The Wall Street Journal, "Our gross subscriber additions in 2007 were the highest in the history of satellite radio."
That still leaves open the question of whether Sirius is a viable company without the merger. It lost $121 million last quarter and it has long-term debt of almost $1.3 billion.
Some analysts believe that the merger will bring savings. But, the talent on the two satellite networks is not likely to want to take pay cuts. The new company would also have to run two networks for some period because the systems are not comparable.
The subscriber additions are nice news, but the company is still a long way from being viable.
Douglas A. McIntyre is an editor at 247wallst.com.
The sizable hurdles of regulatory approval on the part of the Justice Department and the Federal Communications Commission (FCC) remain. Those opposed to the collaboration say the deal would create a monopoly in the satellite radio industry and point to the failed merger attempt between EchoStar Communications (NASDAQ: DISH), parent of the DISH Network, and DirecTV.
Sirius Satellite Radio Inc. (NASDAQ: SIRI) saw a quarterly subscriber increase of more than 50% as the satellite radio company reported a smaller-than-expected Q3 loss this morning. Still ahead is Sirius' planned merger with competitor XM Satellite Radio (NASDAQ: XMSR), which is still on the regulatory burner as this is being written.
Sirius did see a Q3 loss of $120.1 million ($0.08 per share) compared to a year-ago loss of nearly $163 million ($0.12 per share), but revenues did rise 45% to $241.8 million for the quarter, compared to 2006's $167.1 million. The results barely fell short of the market's expectation of $244.3 million. Putting it another way, Sirius pretty much hit analyst expectations. How the estimates can nail such a specific figure is anyone's guess.
Sirius had a devil of a time in the quarter when it can to subscribers, as it added almost 525,000 new ones to its ranks for the July-September period alone. This is the unreal part: Sirius ended the Q3 period with right at 7.7 million subscribers -- a 50% increase than a year ago.
In other words, Sirius added half its customer base just in the last year alone. Now, that's growth (in subscribers, not profit). XM Radio still has more subscribers at 8.6 million, but Sirius may indeed have more before the merger is finalized and complete if it continues growing at the rate it has been in the last few quarters.
Until a decision on XM Satellite Radio Holding (NASDAQ: XMSR)'s hoped-for merger with Sirius Satellite Radio Inc. (NASDAQ: SIRI) is made, both companies are forced to proceed independent of one another. While wishing for the best, the companies must also prepare for the worst, should they lose their hope for synergy.
Part of the companies' continued day-to-day operations include visiting the earnings confessional once a quarter. XM's turn comes tomorrow after the closing bell. According to Zacks, the consensus analyst estimate stands at a per-share loss of 44 cents, with the high end at a 40-cent loss and the low end at a 52-cent loss. This is a decline from a year-ago loss of 32 cents, which positively surprised the Street's consensus view by a healthy margin.
As the firm heads under the earnings spotlight, the shares appear to be bottoming out from a technical perspective. After tiptoeing along the 9-10 range for several months, XMSR has broken out into double-digit territory, gaining nearly 50% since mid-August. This month, the equity has taken out its 10-month and 20-month moving averages. A monthly close atop these long-term trendlines would be the first of its kind since September 2005.
"This merger is clearly in the best interest of rural consumers because it would allow a combined company to expand upon its existing services with increased efficiencies and at the same time provide rural listeners with more diverse programming and lower pricing ... [the merger] will make satellite radio a more viable option for rural consumers ... even in the most remote areas."
Indeed, a combination of the two companies could bring all 4 major sports, Oprah and Stern, and John Cougar Mellencamp and Bruce Springsteen tunes, virtually commercial free, to households distanced from terrestrial broadcast towers.
Originally announced on February 19, 2007, this partnership continues to be closely scrutinized by the FCC as well as the National Association of Broadcasters (NAB). The latter organization effectively represents the combined company's would-be competition, weakening the argument that the satellite-radio merger stifles competition. But I digress before I slip into a monopoly wormhole.
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.
Sirius Satellite Radio (NASDAQ: SIRI) and rival, XM Satellite Radio's (NASDAQ: XMSR) proposal to allow a la carte pricing should convince skeptical regulators to approve the merger which has been bogged down in debtae for five months.
The proposal announced earlier would enable users to cherry-pick their favorite channels as part of a discounted package. The cheapest offering would run for $6.99 per month and includes 50 selected channels; for $16.99, a subscriber can keep their existing SIRI or XMSR service and select from the a listing of the "best" offering from the competitor. Beyond the 50-channel package, additional channels can be added for as little as 25 cents a piece. Premium programming, however, would cost $5 or $6. For the full press release from SIrius detailing the proposed plans, click here.
This should rebut criticisms that the merger hurts consumers. I certainly hope it goes through. The chance to have Howard Stern, Major League Baseball, and the best in commercial-free music is tantalizing, and certainly worth the price of a movie ticket. In fact, it seems as though the only contingent that would suffer from a merger of the only two satellite firms would be their biggest competition, terrestrial radio.
Can anyone explain to me why this merger isn't over and done already? Satellite radio is not a necessity - if the Sirius-XM pairing leads to higher prices, subscribers can choose to leave. The industry faces competition from terrestrial (read: "free") radio, Internet radio, MP3 players, CDs, books on tape, and numerous other forms of entertainment for the home and vehicle.
Shares of both of the major satellite radio operators, XM Satellite Radio (NASDAQ: XMSR) and Sirius (NASDAQ: SIRI) were up today in a weaker-than-usual market for tech stocks. Their moves were in response to an upgrade from a Banc of America (NYSE: BAC) analyst who said he expected the companies to easily beat second-half subscriber estimates.
Although it's certainly nice to beat estimates that don't relate to a company's ability to actually make money after being in business for quite a while, this is only short term news and I don't think investors should be purchasing either stock. I've seen both of these companies making projections of profitability for too long and I think investors who want to speculate would be better fit purchasing names with more interesting stories because they will probably move more (which way, I'm not too sure) and are more fun to track. Plays in clean water, tech infrastructure, and alternative energy are interesting. Satellite radio was interesting and technologically-advanced when dial-up internet was fast.
What seemed more important from the analyst's report was raising his estimate of the chances of the approval of the merger between XM and Sirius from 30% to 35%. While his subjective guess-timations are also quite interesting, they don't really do much for me and I think anyone who purchased the stock today based on this change in his mentality should really consider why they: A) believe him; and B) are betting on an event that (probably optimistically) only has about a one-in-three chance of going through, as opposed to a three-in-ten chance.
XM and Sirius are too speculative and they don't justify their risks. The potential for a big positive move in them seems minimal to me, as investors have come and gone through this sector and there is no value to be had.
Although the proposed merger between satellite radio companies XM Radio (NASDAQ:XMSR) and Sirius Satellite Radio(NASDAQ:SIRI) is not officially a done deal yet, we sure didn't think XM's signal would have gone off the air so soon like it did yesterday. All joking aside, though, some XM customers were unable to listen to their daily satellite radio fix yesterday, as a software problem slashed service for an unspecified number of XM Radio customers.
From all appearances, this was a smaller but still significant glitch that was based in the complex logistics that bring XM Radio to subscribers nationwide -- as opposed to a complete service outage. XM stated that "Some customers are not receiving a signal ... we don't know the exact number, but some." Companies on the bleeding edge of technology sometimes do have glitches, so chalk this one up to that defense.
According to XM Radio officials, service was set to be restored to the customers who were knocked off their subscriptions last night during the evening hours. While these things are bound to happen do to unforeseen errors, were you miffed at the outage if you were an XM subscriber? Or, investor?
Opie (Gregg Hughes) and Anthony (Anthony Cumia) were doing what they've done for years. Didn't XM know what got them fired in Boston (an April fool's gag in which they said the mayor got killed in a car accident) and New York (a couple who had sex in St. Patrick's Cathedral at the urging of a guest)?
So, the fact that the duo aired a homeless man's rant about sex that referenced Condoleeza Rice, Laura Bush and Queen Elizabeth isn't that shocking.
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