Do These Factors Support Higher Prices In Sirius XM Radio?

With shares of Sirius XM Radio (NASDAQ:SIRI) trading around $3, 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 provides satellite radio services in the United States and Canada. The company broadcasts music, sports, entertainment, comedy, talk, news, traffic, and weather channels on subscription fee basis through two satellite radio systems. It also offers advertising on non-music channels and applications to allow consumers to access internet services on mobile devices. Sirius XM Radio has been a pioneer in the audio streaming industry and may finally be getting ready to pay off. Consumer demand for audio streaming has been on the rise so look for this company to make significant moves into the future.

T = Technicals on the Stock Chart are Weak

On the long-term price chart, Sirius XM Radio has displayed a downtrend. Significant rallies has been ultimately met with increased selling. The stock has seen a major move from Financial Crisis lows but is not battling it out near long-term resistance. 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 below a couple of its key averages which signal neutral price action in the near-term.

SIRI

(Source: Thinkorswim)

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

27.73

11%

13%

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

Put IV Skew

Call IV Skew

April Options

Steep

Average

May 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 small 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 Increasing 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?

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2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

-100%

-50%

1500%

100%

Revenue Growth (Y-O-Y)

13.87%

13.74%

12.51%

11.17%

Earnings Reaction

1.26%

0.35%

4.54%

-1.32%

Sirius XM Radio has seen increasing revenue, over the last four quarters, but is still working on its earnings. From these figures, the markets have been pleased with Sirius XM Radio’s last four earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

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

Sirius XM Radio

Cumulus Media

CBS

Pandora

Sector

Year-to-Date Return

-0.83%

23.31%

14.73%

34.35%

8.32%

Sirius XM Radio has been a relative underperformer year-to-date.

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Conclusion

Sirius XM Radio is a company that has a strong amount of experience in the audio entertainment space. As consumers are picking-up on this technology, Sirius XM Radio stands to profit. Earnings are chugging along while revenue has increased over the last four quarters. However, the stock has yet to establish a long-term uptrend. Relative to its peers and sector, Sirius XM Radio has underperformed significantly. WAIT AND SEE what Sirius XM Radio does in the coming quarter.

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