Is SIRIUS XM Radio’s Stock a Worthwhile Risk?

T = Technicals on the Stock Chart Are Strong

SIRIUS XM Radio has underperformed the S&P 500 over the past month, but that shouldn’t be a concern. Over the past month, SIRIUS XM Radio is down 3.55% while the S&P 500 is down only .15%. Year-to-date, SIRIUS XM Radio is up 49.45% while the S&P 500 is up 14.09%. Over the past calendar year, SIRIUS XM Radio is up 55.43% while the S&P 500 is up 24.12%. When you look at three-year returns, SIRIUS XM Radio is up an enormous 331.7% while the S&P 500 is up only 34.85%.

SIRIUS XM Radio is currently trading a tad lower than its 50-day SMA of $2.71. It’s trading higher than its 100-day SMA of $2.51. In addition to that, it’s trading higher than its 200-day moving average of $2.31.

Despite a subpar month, SIRIUS XM Radio has consistently trended up for three years. While there will be bumps in the road, this trend should continue.

E = Earnings Are Steady and Revenue Is Impressive

If you believe in growth above all other factors, then you will be very impressed with the year-over-year numbers below:

2007 2008 2009 2010 2011
Revenue ($) in billions 922.07M 1.664 2.473 2.817 3.015
Diluted EPS ($) -0.39 -2.45 -0.15 0.01 0.07

The quarterly numbers are just as impressive in a relative sense:

9/30/2011 12/31/2011 3/31/2012 6/30/2012 9/30/2012
Revenue ($) in millions 762.55 783.74 804.72 837.54 867.36
Diluted EPS ($) 0.02 0.01 0.02 0.48 0.01

T = Trends Might Support the Industry

It’s difficult to side one way or another here, hence the word ‘Might.’ Satellite radio is undoubtedly a consumer discretionary item. In this economic environment, it’s difficult to say there is a trend for discretionary items. Ironically, discretionary items have performed well despite the weak macro backdrop.

The big debate is whether satellite radio will become the next Cable TV where almost everyone feels the need to own it. While we don’t see every car with a satellite antenna, that could be a positive because there’s evidence of an untapped market. The annual revenue growth above also indicates SIRIUS XM Radio is moving in the right direction.

Another wildcard is there are many old cars being driven in America today. If people go out and buy new cars then we could see a significant boost in SIRIUS XM Radio sales. On the other hand, based on current economic conditions people may choose to continuously put money into their existing cars or buy a used car (go to the next page for my conclusion)