Tag Archives: Mad Money

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Don't Be Aggressive With Sirius XM?

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By Rick Munarriz, The Motley Fool

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Jim Cramer suggested that a cautious stance is in order for Sirius XM Radio during last night’s Mad Money show.

“I think Sirius Radio is a slow grower here,” he warned.

Cramer sees the shares gradually moving from $3 to $3.50, but he feels that speculators holding out for a pop to $5 will be disappointed. The growth isn’t there, he offers.

“Don’t be aggressive!”

The problem, naturally, is that Sirius XM investors have been bred to be aggressive. The stock is volatile. It has rallied over the past four years, clocking in as a whopping 60-bagger since bottoming out in early 2009. However, the stock also crashed in the years preceding that run. Volatility cuts both ways.

It’s been feast or famine with Sirius XM, and now Cramer is advising investors not to be aggressive? To be fair, Sirius XM’s growth has slowed in recent years. Subscriber growth has slowed to the single digits, and that’s unlikely to change in the near term. Sirius XM’s emergence as a profitable media giant was a validating moment, but that stabilizing turn has already been priced into the shares.

Why shouldn’t Sirius XM investors be happy with the 14% return from yesterday’s close to $3.50? It’s not a bad return. It’s not as if Sirius XM is as risky as it was during its dark days of 2009, so it’s not as if shareholders should expect a big risk-adjusted return.

However, there are a few things that could send the stock past $3.50 sooner rather than later.

For starters, Cramer is only half-right about Sirius XM not being a growth story at this point. Revenue growth isn’t likely to accelerate in the near term, but it’s a different story on the way down to the bottom line.

Sirius XM’s guidance calls for revenue to climb just 9% in 2013, but adjusted EBITDA and free cash flow are expected to climb 20% and 27%, respectively. This trend will continue given the scalable model. As long as subscriber growth continues, Sirius XM’s bottom-line performance should surpass its top-line upticks.

There are also online opportunities. Worrywarts paint Pandora as a threat, but it’s also an opportunity, as Sirius XM has introduced some interesting Web-based features over the past year. Receiver-based subscribers have to pay a few dollars more a month for online access, so the online migration is a way for Sirius XM to push its average revenue per user higher.

The two-way nature of cyberspace also opens the door for e-commerce opportunities and more value for advertisers buying ads on the non-commercial-free stations.

The road to $5 was never going to be easy. Sirius XM has a lot to prove if it wants to deem itself worthy of a market cap well north of $30 billion. However, don’t tell investors not to be aggressive with Sirius XM. It’s the only way that people know how to play the high-beta media giant.

Deep tracks
Despite Sirius XM being one of the market‘s biggest

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Neither Apple Nor Microsoft Are Buying Netflix

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By Rick Munarriz, The Motley Fool

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Netflix would apparently look good on the arm of Apple or Microsoft .

Jim Cramer played up the video service as a potential acquisition target on CNBC’s Mad Money show on Monday night.

However, instead of going the more common Amazon.com route, Cramer only singled out Apple and Microsoft as logical buyers.

Tying the knot with Netflix
Apple, according to Cramer, “needs a mobile content offering as well as something proprietary to run on Apple TV.”

He also suggests that Apple needs to make a meaty acquisition to wake up its freefalling shares: “How do we reverse that? Netflix!”

Cramer also argues that Microsoft should bid $13 billion for Netflix, a 30% premium to where it is now.

“Don’t rule it out,” he argues. “Why should this monster stay independent with its 27 million subscribers and Steve Ballmer desperate to leave a legacy?”

Both possibilities make sense, but they seem flawed after thinking them through.

Apple is being widely criticized for stashing $137 billion in cash as growth prospects peel away. The theory that the iEverything titan needs something proprietary for Apple TV isn’t necessarily a good reason to buy Netflix. If the plan is to tie Netflix only to Apple TV owners, it would be merely keeping a Ferrari in the garage. Netflix’s global appeal is easy accessibility, and that means not tethering it to any particular platform. Anything that would limit Netflix’s subscriber count would also limit its ability to pay for content.

Microsoft makes more sense, especially since it was pretty suspicious when Netflix CEO Reed Hastings stepped down from Microsoft’s board last year. There must have been something there.

However, the notion that Microsoft can sweep Netflix away for $13 billion is poorly conceived. A year ago, Netflix could’ve been had for half that price. Its stock was out of favor. Now that analysts are jacking up targets and subscribers are topping 33 million globally, do you really think Netflix and its shareholders will consider an exit strategy?

Apple, Microsoft, and Amazon could’ve probably had Netflix at the nadir of the Qwikster fiasco. They would have been welcomed as saviors.

They would’ve gotten a great price. Apple would make sure that the iOS Netflix app would be the best. Amazon could retire its less popular Amazon Prime streaming offering. Microsoft could’ve kept a cool toy from its rivals, making it the cornerstone of the new Xbox experience.

However, it’s too late to buy Netflix. The only ones buying Netflix now are tomorrow’s investors.

Recommended reading
The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company’s first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Netflix a Housing Play?

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By Rick Munarriz, The Motley Fool

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Drywall, hardwood planks, and Netflix ?

Jim Cramer offered an interesting perspective on the leading video service as a housing play during last night’s Mad Money show.

“Despite its run, I think the stock has a strong chance of repeating its excellent performance,” Cramer argues in discussing the shares that more than doubled this past quarter — and have more than tripled since last summer.

He positions Netflix as a takeover target. He also points to the success of shows on cable networks in recent years. The desire for fans to get up to speed is now coming from binge viewing on Netflix.

Believe it. Mad Men — not to be confused with Mad Money — returns on AMC Networks for its sixth season on Sunday. When ratings for the fifth season’s premiere spiked 20% last year, the show’s producer gave Netflix a lot of the credit.

After all, the show made its four earlier seasons available through the streaming service months ahead of the new season. At the time, Netflix chief content officer Ted Sarandos pointed out that 3.5 million of its subscribers watched the fourth season of the show through the video service, and that 800,000 accounts went through all of the earlier seasons.

However, Cramer’s most interesting claim is that Netflix is a housing play.

There’s no place like home screen
“As more homes are built, cable, dish and Netflix get hooked up,” he says. “It’s a natural tailwind. When you buy that new TV it has that Netflix clicker on the bottom.”

He’s right. The home resale market is buzzing again, but the real growth is taking place in new construction.

Lennar reported blowout quarterly results two weeks ago. New home deliveries were up 28%, but new orders rose by an even more encouraging 34%. We may be only talking about thousands of incremental homes in Lennar’s case, but when you work the math across the countless other real estate developers, you’re seeing a lot of homes going up in areas that were just tracts of land when the housing market stalled.

There are plenty of new homes going up, and saving money after signing off on a new mortgage makes in-home entertainment a very smart play. Given the three-figure monthly ransoms offered by cable and satellite companies, it wouldn’t be a surprise to see a lot of first-time home buyers this year simply going for a Wi-Fi connection and sticking with HD antennas for over-the-air networks and Netflix for everything else.

Netflix is already at more than 27 million domestic subscribers, making it larger than any single cable or satellite service, and that figure is only going to get bigger as more video buffs get their own place.

The streaming dead is alive
The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company’s first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, …read more
Source: FULL ARTICLE at DailyFinance