Avoid Sirius Satellite Radio and XM Satellite Radio

The stocks of Sirius Satellite Radio (SIRI) and XM Satellite Radio (XMSR) look like disasters waiting to happen. Many retail investors love to hype these stocks. The SIRI crowd feels that it could return to $60 or $70, its super-inflated highs of early 2000. Or at least it should trade in the high $30 range, the current price of its chief competitor XM Satellite Radio.

But look at the numbers. SIRI has a market cap of nearly $10 billion at its current price of $6 - $7. Its price to book ratio is 211.75. And it has 1.25 billion shares available for trading. No wonder is always one of the most actively traded stocks.

XMSR's price is not quite as inflated but its significantly over priced. XMSR is expected to lose money for the years despite strong subscription growth.

Both prices are driven by hype and expectations of a great future for satellite radio. Yes, subscribers will increase but when will either stock make money? Maybe never.

The prudent investor would avoid both SIRI and XMSR.

Posted December 29, 2004.