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[Ulisses Pereira]

"Sirius Hasn't Lost Speculative Charm"

By James J. Cramer
RealMoney.com Columnist
2/23/2005 8:56 AM EST



"The Sirius Satellite (SIRI:Nasdaq - commentary - research) spell, for the moment, seems broken. Every time Sirius has ever touched the canvas, every time something has happened that has driven the stock down, the company has, miraculously, countered with some bit of good news that made the sellers seem like morons.

This weekend, when word of a subpoena over possible insider trading went out involving Howard Stern, I figured, brace yourself for some good Sirius news. It always has something in the hopper.

Sure enough, Sirius announced it now would be a vendor for Nascar.

Brilliant!, I said to myself, no doubt mocking those great Guinness ads. Right after the Daytona 500! The only thing better would have been the Friday before the race, but who's nitpicking now?

Nascar is the equivalent of "better than expected" in the media world. Everything Nascar is upside. Everything. It is one of those brands, like ESPN, like Procter & Gamble (PG:NYSE - commentary - research), like Pepsi (PEP:Nasdaq - commentary - research), where no one has a bad word to say. Nascar is a dollar magnet. It is the most commercial sport in history and one advertisers simply can't get enough of, even if it means having a little emblem sewed in under someone's armpit.

But something happened Tuesday that wasn't true to form: Despite the best affiliation possible, Sirius went down. Not only that, the market actually questioned whether Sirius overpaid. Before this Nascar deal there had never been a question; the buyers always came in and swamped the stock, moving it much higher, making whatever deal had been announced worthwhile immediately. Worse, this was a cash deal, a sign that Sirius recognizes it has issued too much stock all around. Yet, Sirius still went down.

What gives? Is the charm broken? Is the stock no longer a speculative fave?

No, I think what happened is that speculation has been a real mug's game in 2005. All of the speculative lovebirds from 2004 have been shorn of their wings since 2005 began. They now just flicker and flutter and end lower.

Oddly, when I look at this deal, I actually like it. Mel Karmazin is a man who likes to sell ads. Nascar fans not only don't mind ads, they seem to like them! This deal actually could translate into ad dollars for Sirius in 2007. This is a piece of business XM Satellite (XMSR:Nasdaq - commentary - research) should have taken.

It doesn't matter, though. We are in antispeculative mode. People want earnings. They want the tangible earnings from Arch Coal (ACI:NYSE - commentary - research), not the intangible ethereal stuff from Sirius.

I've had Sirius in my radio show Danger Zone since the stock hit $9 last year. It's now retreated almost by half. Yet it's still not where I would call it a bargain. Not by a long shot. This stock was at $2 in August 2004, for heaven's sake. I still am not tempted to buy it.

But those who have suffered through this sickening decline have to ask at this point, "Why bother selling it?" We are slightly more than a point from where the whole Stern rally occurred. We've repealed most of the takeover premium. Sure, it still is valued at $7 billion, but given its Apple (AAPL:Nasdaq - commentary - research)-like ability to wreck the industry, I don't think it will ever return to $2 again. If it did, it would be too smart for a Yahoo! (YHOO:Nasdaq - commentary - research) or a Google (GOOG:Nasdaq - commentary - research) to buy. Or even an Apple -- wouldn't that be a killer?

To me, Sirius' action says it is headed to $4, where I bet it will make a stand. At that level, you have to think that it makes a nifty call option on Karmazin, NFL, Stern and Nascar. Risky, speculative, but worth betting on. "

(in www.realmoney.com)