With shares of Sirius XM Radio (NASDAQ:SIRI) trading around $3.46, 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 Strong
Sirius XM Radio stock has been on a strong surge higher since establishing lows during the 2008 Financial Crisis. The stock is now coasting higher and sees no signs of slowing. 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 slightly 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 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 | 37.89% | 66% | 62% |
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 | |
| July Options | Flat | Average |
| August 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 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% | 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 Radio has seen improving earnings and revenue figures over the last four quarters. From these numbers, the markets have been upbeat about 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), Cumulus Media (NASDAQ:CMLS), CBS (NYSE:CBS), and sector?
| Sirius XM Radio | Pandora | Cumulus Media | CBS | Sector | |
| Year-to-Date Return | 14.88% | 56.32% | 34.83% | 26.99% | 28.34% |
Sirius XM Radio has been a poor relative performer, year-to-date.
Conclusion
Sirius XM Radio provides a wide variety of audio entertainment channels to excited consumers in the United States. The stock has been on strong surge higher over the last several years and seems to be poised to continue this trend. Over the last four quarters, earnings and revenue figures have improved, which has really helped maintain investors upbeat about 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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