Sirius falls mightily in serious trading
Sirius Satellite Radio Inc. stock has been a shooting star. How else would one describe a stock that has gone from a low of $2.01 (U.S.) on Aug. 11 to a high of $9.43 on Dec. 7. That high was nearly triple Sirius's price two months ago when it signed up shock-jock Howard Stern for a five-year contract beginning in 2006. Subsequent to that, Sirius hired former Viacom Inc. president Mel Karmazin as chief executive officer. But a lot of the wind has come out of Sirius' sails yesterday, thanks to downgrades on the stock.
Niraj Gupta, an analyst with Smith Barney, wrote in a report released early Wednesday morning that the stock, which has traded an average of nearly 100 million shares a day over the last three months, has risen too much too fast. "While we remain bullish on company fundamentals, we believe the recent surge in the stock has taken SIRI to levels, which are difficult to justify using any reasonable valuation framework," he wrote.
Mr. Gupta lowered his rating on the shares of the satellite radio provider to "sell-high risk" from "hold-high risk" and suggested investors take advantage of strength in the stock to take profits, "as we believe share price performance is being driven more by news flow, than by fundamentals at present." He suggested that there is better relative value in XM Satellite Radio Holdings Inc., Sirius' competitor in satellite radio. He also said that he does not expect Sirius to generate free cash flow on a full-year basis until 2008, primarily because of the costs of acquiring subscribers.
Robert Peck, who follows Sirius for Bear Stearns & Co., cut his rating on the stock to "peer perform" from "outperform."
Investors apparently took the recommendation cuts to heart. They knocked Sirius's shares down $2.11 or 23.5 per cent to $6.90 yesterday. Almost 579 million Sirius shares changed hands on the Nasdaq Stock Market, serious trading indeed. In fact the Nasdaq said it was one of the largest single-day volumes in a stock that it had experienced. Angela Barnes
CIBC's Berman likes technology stocks
Don't sell those technology stocks just yet. The technology stock-led rally of the last few months still has room to run, according to Larry Berman, chief technical strategist at CIBC World Markets Inc. "The charts in technology look very impressive, even after the strong rally that began in August," he said in a report earlier this week. Stocks are breaking out from consolidation patterns, yet many tech stocks remain well below their 2004 highs or their 200-day moving averages, "which will act like technical magnets over the next few months."
The tech-stock laden Nasdaq Stock Market composite index at 2,126 also remains below its January, 2004 high of 2,154, he noted. However, Mr. Berman sees that high as only a short-term hurdle, "not a long-term ceiling."
It isn't just technical patterns that favour the sector, he indicated. Fundamental factors also do and not just the popularity of high-tech gadgets as gifts for Christmas, he noted. He pointed to the recent good news out of tech-sector heavyweights, Intel Corp. and Microsoft Corp. Earlier this month, Intel said it expects fourth-quarter sales will beat earlier expectations by at least 8 per cent and Microsoft distributed a $32-billion (U.S.) special dividend in addition to its regular quarterly dividend of about $1-billion. Angela Barnes
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