Why Sirius XM is a buy

The satellite radio stock is on a tear in 2010, and has the fundamentals to back it up

By Louis Navellier May 24, 2010 9:50AM

louis navellier penny stock siri sirius xmI’m not a real believer in true “penny stocks,” since unknown companies with unknown fundamentals don’t jive with my growth investment strategy.

But I will say that there are a number of cheap stocks out there -- less than $2 or $3 a share -- that have enough Wall Street coverage to be legit, and have shown me enough punch that they would be worth any investor’s cash.


While most of these stock picks tend to be tiny, with a market cap of only a few hundred million dollars, one big penny stock stands out to me right now as a great opportunity: Sirius XM Radio (SIRI). Shares are less than $2 as of this morning’s open and are a great buy at this valuation. Here’s why:


While it’s true that Sirius XM hasn't turned a profit in the last fiscal year, SIRI stock is approaching profitability in a hurry. When that happens, I expect a huge splash on Wall Street simply because of the cult following this satellite radio provider has. The consensus estimate for Sirius’ next earnings report is break-even, with a low of -1 cent a share and a high of +1 cent a share. But the most encouraging thing is that a number of experts have been revising their estimates up lately – and in my book, that is almost always a sure sign that a stock will impress when it releases earnings.

Those are fundamentals you can take to the bank for any stock, whether it’s a small-timer like SIRI or a big-name blue chip. Sirius has momentum behind it, with a narrower quarterly loss in each of the last three periods, and I am confident this trend will continue. Sirius recently raised its 2010 earnings forecast, saying that a recovery in auto sales and consumer spending has helped to boost its audience recently. I expect more gains as the broader economic environment continues to improve.


What’s more, the fever has already started on Wall Street. Shares of SIRI stock are up 70% year-to-date as of the opening bell this morning – a stunning run considering the market’s volatility in the last several weeks!


So if you don’t mind the risk factor involved, consider jumping into Sirius now before it’s too late. Once the company nears its next earnings date (likely three months or so out since the company just posted Q1 numbers a few weeks back), shares should really heat up.


To find out 11 other low-priced stocks to buy like Sirius, check out my recent article - Stock Picks - 12 Hot Penny Stocks to Buy Now.


One final note: If you are thinking of buying SIRI stock, please use limit orders before purchasing. Though a fairly liquid stock, shares can gap up in a hurry since the price of this company is so low. That means it’s up to you to protect yourself from overpaying for these penny stocks. Not only will this prevent you from losses, it will boost your profits by providing a better entry price. Keep this in mind for all low priced stocks, not just Sirius.


As of this writing, Louis Navellier did not own a position in this stock in either personal or client portfolios.


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