Can Sirius XM Radio Continue This Bullish Run?

With shares of Sirius XM Radio (NASDAQ:SIRI) trading around $3.15, is SIRI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sirius XM Radio broadcasts its music, sports, entertainment, comedy, talk, news, traffic, and weather channels in the United States on a subscription fee basis through its two satellite radio systems. Subscribers can also receive its music and other channels over the Internet, including through applications for mobile devices. Audio entertainment has always pleased consumers and is a medium that is growing in popularity. Sirius XM Radio is looking to expand its audio entertainment channels to every audio medium possible, which will surely translate to rising profits. As consumers continue to adopt this technology, look for Sirius XM Radio to gain market share.

T = Technicals on the Stock Chart are Mixed

Sirius XM Radio stock has seen an explosive move to higher prices after the 2008 Financial Crisis. The stock is now trading at multi-year highs but may need some time before its next move. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sirius XM Radio is trading near its rising key averages which signal neutral to bullish price action in the near-term.

SIRI

(Source: Thinkorswim)

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Taking a look at the implied volatility (red) and implied volatility skew levels of Sirius XM Radio options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Sirius XM Radio Options

50.58%

96%

92%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Steep

Average

August Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Improving Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sirius XM Radio’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sirius XM Radio look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

0.00%

104.80%

-50.00%

1500%

Revenue Growth (Y-O-Y)

11.52%

13.87%

13.74%

12.51%

Earnings Reaction

5.86%

1.26%

0.35%

4.54%

Sirius XM Radio has seen improving earnings and revenue figures over the last four quarters. From these numbers, the markets have been excited with Sirius XM Radio’s recent earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

How has Sirius XM Radio stock done relative to its peers, Pandora (NYSE:P), CBS (NYSE:CBS), Cumulus Media (NASDAQ:CMLS), and sector?

Sirius XM Radio

Pandora

CBS

Cumulus Media

Sector

Year-to-Date Return

12.98%

64.81%

24.05%

25.47%

22.43%

Sirius XM Radio has been a relative poor performer, year-to-date.

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Conclusion

Sirius XM Radio provides audio entertainment and information services via subscription services to a growing listener base. The stock has been moving higher in recent times but is now consolidating gains so it may need a bit of time. Over the last four quarters, earnings and revenue figures have improved which has really sat well with investors in the company. Relative to its peers and sector, Sirius XM Radio has been a poor performer year-to-date. WAIT AND SEE what Sirius XM Radio does this coming quarter.

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