Last week I predicted that SIRI would beat the Street est. and lose a penny. It did even better by breaking even. I said it would gain 78,000 subs, it was up 102,000. I said Rev. per sub would be UP and SAC would be down. Both were true. I suggested that free cash flow would be up 50M and was disappointed it was not. The report was fantastic and I told you the Street would YAWN AT IT. I saw the angst on the board. Apparently, you come here every week to read The Duke and forget everything I say in ten seconds or less.
There were two huge points in the CC that were overlooked by the press and you. The first was that Mel reminded everyone that SIRI had prepaid 82M of the Dec. debt and 59M of the 2011 debt. The second was that in the future 70 per cent of all new revenue would fall to the bottom line as cash flow. What this means is that a 200M increase in REV. in 2010 will translate to 550M in cashflow In 2011, another 200M will yield 700M cash. SIRI will generate 1.25B in cash flow. In the second half of 2010 SIRI will buy back some of the 2011 debt. The analysts will see that SIRI is REDUCING DEBT, raising profits by cutting the interest payments and the stock will soar. That is a 2010 story.
I have spoken about the Elongated Accumulation Process without explaining what it is. Time for a Duke Tutorial. On Oct. 7, we hit the bottom of Duke's three legs down at 51.1 This meant we had three resistance points on the way up. 57, 66, and 78. We crossed over 57 on Oct. 14 and I announced the end of the 5 year DOWN TURN in SIRI. From Oct 14 to Nov 3 we worked the bottom of the second resistance level between 57 and 60. We are now working the top level of the second leg between 61 and 66. Be patient. I expect a breakout to the third level just before or after Thanksgiving. My prediction that we will be over $1.00 by 2/15/10 still stands.
Finally most of the major advisory services such as Market Edge and Vector Vest told you to sell or avoid SIRI two weeks ago when the stock went into the high 50's. The Duke told you to sell in mid Aug. at 73 and accumulate below 57. Why the difference? The major sevices use a standard tracking program that is always too late. One program fits 10,000 stocks. Stupid approach. Here in the Land of the Duke, we use an individual program for each stock we track. Each stock has its own heart and soul and we track it evey minutes of every day. Totally different approach and our clients pay for the difference.