With shares of Sirius XM (NASDAQ:SIRI) trading around $3.50, 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 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 here to stay. Sirius XM 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 to gain market share.
T = Technicals on the Stock Chart are Strong
Sirius XM stock has seen an explosive move higher after establishing lows during the 2008 Financial Crisis. The stock is currently trading at multi-year highs and seems to want to keep plowing higher. 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 is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Sirius XM options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Sirius XM Options | 35.33% | 53% | 52% |
What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Flat | Average |
| July Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish 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’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sirius XM 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% | 104.8% | -50% | 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 has seen increasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have been excited about Sirius XM’s recent earnings announcements.
P = Average Relative Performance Versus Peers and Sector
How has Sirius XM stock done relative to its peers, Pandora (NYSE:P), Cumulus Media (NASDAQ:CMLS), Dialogic (NASDAQ:DLGC), and sector?
| Sirius XM | Pandora | Cumulus Media | Dialogic | Sector | |
| Year-to-Date Return | 21.80% | 80.50% | 41.57% | -36.22% | 19.33% |
Sirius XM has been an average relative performer, year-to-date.
Conclusion
Sirius XM provides audio entertainment services through growing mediums to consumers of any age. The stock has been exploding higher over the last few years and is now trading at multi-year high prices. Earnings and revenue have been increasing over most of the last four quarters, which has really excited investors. Relative to its strong peers and sector, Sirius XM has been an average year-to-date performer. Look for Sirius XM to OUTPERFORM.
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