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October 8, 2004 Stock Pick: Sirius Satellite Radio, Inc. (SIRI)

Stock Price: $4.00 (short-term strong short)

Sirius Satellite Radio, Inc. broadcasts commercial-free satellite radio to its subscribers.

Our Stock Pick of SIRI on July 23rd at $2.50 has since risen 71% to as high as $4.29. We now believe SIRI has become severely overvalued. Sure, the deal with Howard Stern is huge, but this will only bring one niche of subscribers to their service, and does not justify the recent gains in market cap.

SIRI has a market cap of $4.95 billion, while their competitor XMSR has a market cap of $5.80 billion. The truth is that SIRI still lags behind XMSR in subscribers and exclusive ties to automakers, both of which drive the valuations of each stock. Also, Howard Stern isn't even going to be on the air for SIRI until 2006.

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