Sirius XM Radio (NASDAQ:SIRI) stock has experienced a 14%
pullback over the first 7 trading sessions this month and is fast
approaching our stock price estimate. With no major news coming out
of Sirius over the past week, emotional trades seem to be the main
reason for the sell-off. Sirius is mainly distributed through
automakers and retail locations as well as through Sirius' own
website. Sirius XM has ties with major automobile manufacturers
such as Ford (
) and Toyota (NYSE:TM), which help drive its presence in the
U.S. automobile space.
Sirius' closest competitors include Cumulus Media Inc. (
) (America's second largest operator of radio stations) and
Westwood One Inc. (
) (the largest provider of audio content in America), as well
as traditional AM/FM radio and internet radio offerings from
Pandora and Rhapsody.
We currently have a
price estimate of $2.00 for Sirius XM Radio's
, roughly in line with market price.
While Mel Karmazin, Sirius's CEO, has indicated that Sirius
might put its free cash flow to use by buying-back shares or
through cash dividends, most market participants don't expect this
to happen before 2012. Many traders holding long position in
the stock are looking forward to Q2 2011 results in August when
they hope Mel's guidance on earnings and on SatRad 2.0, the next
generation satellite radio, will take the stock to newer heights.
Because emotions seem to be the main driver of recent Sirius stock
performance, we expect that the stock price will remain
volatile around its fundamental value of $2.00 until
management's next earnings guidance.
See our complete analysis of Sirius XM
Radio stock here