Sirius Reservations

Editor's note: This Stocks Under $10 alert was originally sent to subscribers Oct. 30 at 1:34 p.m. EST. It's being republished as a bonus for TheStreet.com and RealMoney.com readers. Frank Curzio heads TheStreet.com Stocks Under $10 Investment Team.

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It seems like just yesterday that Howard Stern announced he was leaving terrestrial radio to begin broadcasting his show on commercial-free Sirius Satellite(SIRI Quote). Sirius shares traded up to $8 in December 2005 on the news, but then quickly began a downward trend to their current level around $3.79. But even at this price, are shares worth buying?

At the current price Sirius still has a market capitalization of $5.4 billion, so don't let the low price of the shares fool you. Sirius is still a big company and has one of the largest market caps of stocks in the under $10 universe. Also, the company's debt is more than $1 billion, and analysts do not expect Sirius to make a profit until after 2008.

Over the past few months, Wall Street's main concern has focused on Sirius' subscriber growth. Last year, the company said it expected to have 6.3 million total subscribers by the end of 2006, but given its second- and third-quarter net new subscriber additions, we believe this number may be too optimistic. Shareholders seem to agree, as the stock is trading near its 52-week low.

In August, Sirius announced it had added 600,460 net new subscribers in the second quarter, and in October the company reported 441,000 for the third quarter. Those additions give Sirius 5.1 million total subscribers -- or 1.2 million subscribers short of the 6.3 million forecast. Considering the average number of net additions in the previous two quarters, we believe it will be very difficult for Sirius to pull in as many as 1.2 million net new subscribers -- albeit during the holiday season -- in just three months.