Friday, April 14, 2006

Cramer Lightning

April 14, 2006

Satellite Standard group (SSG) like to keep you up to speed with the happenings in satellite radio. Last evening on the “Lightning Round” segment of his Mad Money show on CNBC, Jim Cramer took a call about Sirius Satellite Radio (symbol SIRI). Cramers comments were, "Epoxyed to $5. I couldn't break it loose with a crowbar. Don'tBuy Don'tBuyt Don'tBuy."

That opinion is all well and good for his Lightning Round, but what exactly does it mean?

Like him or not, Jim Cramer has an opinion. He also has viewers, and that can impact an equity.

So, Cramer is of the opinion that Sirius is “epoxyed to $5.” He has also stated “Do’t bet against Mel.”….referring to Sirius Satellite Radio CEO Mel Karmazin.

Is Sirius epoxyed to $5? Perhaps…at least for the time being. You see, Sirius is a few weeks away from reporting their first quarter operating results. The street is highly anticipating these results, as well as the guidance that Karmazin will be offering. Everyone is waiting for a catalyst that will help Sirius, as well as rival XM move forward, and thus waiting to see some guidance from these companies.

It is no secret that Sirius and XM are not yet profitable. These companies are both in the early stages of their growth. Great subscriber numbers and the announcements of content deals used to be events that acted as a catalyst, and to a smaller extent now, they still do. The new buzz phrase, however, for this industry is Cash Flow Break Even (CFBE), and at this point Sirius and XM sit in that “no-mans-land” between the old catalyst of subs and content deals and what will be the new catalyst CFBE.

Cramer states that he couldn’t move Sirius with a crow bar. The reason is that Cramer does not posses the crow bar. That tool is in the hands of Sirius’ CEO Mel Karmazin, and we know that Cramer has previously stated, “Don’t bet against Mel.” Karmazin has stated and reiterated several times that Sirius is on the way to being CFBE in the fourth quarter of this year and throughout 2007. If Sirius shows clearly that they are on that path to CFBE, the catalyst (or crow bar) could come into play quickly.

Should investors listen to what Cramer has to say? That is for each investor to consider for themselves. In our opinion investors should be aware of what he says, but should also take a deeper look into the equity and what is happening with it. There are more sources for your investment guidance than Jim Cramer and Mad Money. Does Cramer’s sentiment set a base for Sirius? Perhaps it helps firm up a base that many already felt was in place. Investors should ask themselves if they feel that the $5.00 range is a solid base for the company. If you feel that it is, and you feel that Mel Karmazin will deliver on bringing this company to CFBE, then you may want to consider a play in this equity.

UPDATE: A reader has pointed out that Jim Cramer does sydicate his show on CBS Radio, and that there is a potential conflict due to the fact that CBS Radio has named Sirius in a law suit.

Satellite Standard Group is not a Financial Advisor. SSG fully encourages people to conduct their own research and consult a Certified Financial Planner prior to making any investment decisions. This piece contains opinions.

The link to this write up is http://tinyurl.com/gxb6r

4/14/2006 10:58:00 AM

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