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Author: newsreporter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10873  
Subject: Analyst comments Date: 11/25/2011 5:12 PM
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Some investors are very passionate about satellite radio provider Sirius XM Radio. This passion has more to do with the length of time invested in the company than any affection for the company itself. Sirius XM has taken over a decade to turn a profit and has been hyped all the way. Sirius does have an excellent business model should the company reach scale. The company’s heavy initial investment in satellites has led to the ability to service additional customers at minimal cost. Should the company reach scale the earnings theoretically would just continue expanding. The problem is reaching scale has been a long process and now the growth rate has slowed. Revenues have grown only 7.6% over the last year, compared to 63.4% annually over the last five. Earnings per share are expected to be $0.07 for the year. Since shares currently trade in the $1.70 range that means earnings per share will need to make it to $0.17 before the shares earn that valuation. With revenues growing at a mere 7.6%, this could take a while. Competitors like Entercom Communications (ETM) and Saga Communications (SGA) trade for much lower multiples, 3.9 and 12.6 times forward earnings respectively. That said something about satellite radio is much more attractive than terrestrial radio. What it is that makes satellite radio attractive from an investor’s perspective is yet to be seen. Investors interested in Sirius should really think about what will drive the company’s growth. Pandora Inc. (P) now offers in-car services and consumers can always just tune into terrestrial radio stations for free. Why would consumers choose Sirius? There are reasons; investors should just weigh them before investing in the company.
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