Monday, November 06, 2006
Could SDARS Be Setting Up A Perfect Storm?
November 6, 2006
The term “Perfect Storm” has been assigned to various equities at various times. It is typically utilized when it appears that several factors surrounding an equity seem to be lining up for positive momentum, but confirmation has not yet been obtained. A “Perfect Storm” happens when many positive indicators are aligned, and the confirmation that things are running right happens.
Is satellite radio as a sector lining up for a “Perfect Storm”?
Only 24 hours ago, most would not say so. However, after the tremendous news of XM’s third quarter report, a storm is now brewing for satellite radio. At various times, both XM and Sirius have enjoyed “Perfect Storm” situations, but never has the sector as a whole seen this happen.
XM simply hit the ball out of the park today, and the sector has a report from Sirius following on this Wednesday. After several conference calls from XM that were not well received, and a series of bad news that shook the confidence of investors, the third quarter performance seemed to materialize out of nowhere, much like a hurricane brewing in the Eastern Atlantic. To be clear, the quarter still had a loss, but what XM illustrated today was that they can exercise controlled spending, and can spend at a rate representative of the subscribers they are bringing in.
What followed was a wave of trading activity that will likely continue to build in anticipation of Sirius’ call.
The street is now looking at satellite radio from a new perspective…..at least for the moment. The sector now hinges on Sirius and Mel Karmazin. If Sirius has a positive call, what transpires could be an early Christmas present for SDARS investors.
A good call for Sirius, and both equities should see immediate and continued appreciation. Should Sirius match the fiscally responsible statements made by XM Satellite Radio, the street will have no choice but to take notice.
A positive call from Sirius, and those that say that satellite radio is a money pit will have a much harder time trying to defend that statement. A lot of the “negative” rhetoric will be replaced with people looking to a much more validated business model for SDARS in general.
If you are invested in this sector, you want nothing more than to see Sirius have a great conference call. Both Sirius and XM demonstrating fiscal responsibility, and both demonstrating that CFBE is a reality, along with what looks to be great Fourth quarters could well prove to be a PERFECT STORM.
11/06/2006 10:48:00 PM
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