Sirius XM Hits 1 (Photo credit: Wikipedia)
Before you read further, let me make it clear that we are not going to countdown each day until Liberty Media takes full control of Sirius XM. However, it is worth noting that there are also (unofficially) 18 trading days until the satellite radio giant reports Q4 earnings.
The debate here is whether or not Liberty wants Sirius XM to get more expensive, which is what is likely to happen. But does Liberty care? As noted, with roughly 18 trading days left until Sirius reports what is expected to be a stellar Q4, the stock has the potential to reach $3.50.
This would represent a 14% premium above Monday’s $3.08 close. Considering that Sirius has already gained 7% this year – jumping from $2.89 to current levels, if you couple this with my $3.50 target, this would represent a total gain of 21% by the earnings announcement. Why does this matter?
At this time last year, ahead of Sirius’s Q4 report, the stock entered January 2012 at $1.83. However, by the time Sirius reported earnings, shares soared to $2.20 – gaining 21%. Of course historical performances do not guarantee future results – I get that.
However, Sirius XM’s future was not as clear as it is today. What’s more, auto sales were reportedly much stronger in this fourth quarter than they were in Q4 2011. Right now it is a race between Liberty and Sirius XM retail investors to see who can realize more value. With Liberty needing only less than 1% of Sirius to seize full control, it is taking a risk by waiting.
On the other hand, Liberty might have already acquired the number of shares it needs. This is one explanation for why the volume in Sirius surged up 44% recently. Due to SEC rules, if this is the case, Liberty has 10 days to disclose it, which means investors should hear it any day now.
Then again, if Liberty is still waiting, the question is why? Does the company expect Sirius to report disappointing Q4 results that may drive the price below $3.00? This is not likely.
In pre-market activity, shares of Sirius were down 1 cent to $3.07 on light volume.
