Back in early September, TV host extraordinaire, Regis Philbin called into CNBC’s Fast Money to discuss his investment in MU that he bought in early 2013 in the high single digits and suggested the stock could see north of $20 by year end, have a look:
Well, last week when I was on the show Regis called in and said he sold the stock at $23, near the recent highs. That was some trade. If you watched long enough you noticed two more interesting points that Regis made, that the recent trend of strong auto sales should be good for SIRI, and more importantly when he said, “I am getting to like Nathan!”
The truth is I hadn’t looked at SIRI’s stock in a while and was a little caught off guard, but was intrigued. The truth is, SIRI is a great product, at a very reasonable price point, where they have a near monopoly, at least in autos.
Since Regis announced his latest “pick to click” to the Fast Money gang, the stock made a new 52 week and 7 year high, but has since declined about 15% on concerns ranging from Spotify’s new free streaming service, to the expected proliferation of smart connected dashboards in cars like the Tesla Model S.
In all seriousness, what got me once again thinking about the stock is the enthusiasm about Pandora in the public market, sporting an almost $6 billion market cap with far fewer paid users (about 3 mil paid, 70 mil total) than SIRI, trading at almost 9x sales, and Spotify, which is private, but recently raised a bunch of cash placing a value on their 6 million paid users north of $4 billion. SIRI by no means is a cheap stock with minimal earnings, but the company has grown sales at about 10% a year for the last few years and analyst expect them to continue to do so.
My sense is that SIRI could start to be viewed in a different light if some of these less established streaming upstarts continue to see their valuations expand in the new year. Also, SIRI has long been considered a strategic asset (with 25 million paying subscribers) as one of the few outlets into in-car entertainment, I would have to assume that the company’s $22 billion market cap does not preclude it from being a potential take-over candidate from other large media properties or even a technology company such as as AAPL or AMZN could have multiple uses for such a service.
We are going to do a deeper dive on the company’s fundamentals in the very near future, but we thought that we would dip our toe in the water on the long side and buy some stock prior to year end and then take a closer look at ways to enhance yield or add leverage in the options market after we get a better sense for the company’s prospects in the new year. Stay tuned we will have a more detailed run down of the new trade, but in the mean time we are going to start a quarter position in the stock, and possibly start to think about it for the investment portfolio which we’d then manage with the use of option overlays.