Sirius XM Radio (SIRI)
Company Profile: Sirius XM provides music and talk radio entertainment through satellite transmissions.
Current Share Price: $1.65 (Jan. 6)2010 Share Price Gain: 179% Comeback Story: Sirius XM is often described as a "cult stock," due to the large following of individual investors in the company. Sirius was formerly known as Satellite CD Radio, which went public in 1994, trading around $4. The stock had an eye-popping run in the late 1990s, climbing above $60 in early 2000. But as the tech bubble burst, so did Sirius shares, plunging below $3 in late 2001. By late 2004, Sirius installed media veteran Mel Karmazin as CEO and announced the signing of Howard Stern, news that pushed Sirius shares close to $8. Sirius and XM Satellite Radio were in a heated competition for talk radio personalities and sports broadcasting before eventually merging in 2008, more than a year after initially announcing the merger. Subscriber losses and bankruptcy fears dropped Sirius XM shares to 5 cents before Liberty Media took a stake in the company. Cost-cutting and rapid improvement in the U.S. auto industry helped Sirius XM shares roar back, as the stock now trades close to its 52-week high of $1.74. "They're starting to be cash flow positive, which is a good sign," says Wilsey. "But I still wouldn't buy the stock yet, even though I like the product, because they're still not making money and I still have concerns about replacements. Just because I have it in my car doesn't make it a good investment." Michael Benoit, equity analyst at Talon Asset Management, also makes note of the challenges Sirius XM still faces. "It's a little tougher here. They do have a unique product and replicating what they do is very difficult. There are replacements, but Sirius XM has a lot of talent. There's only one Howard Stern. But the difference is the leverage factor, which is going to put some pressure on the company. They have high fixed costs. It would be different if they had no debt, and it was a cash-rich business."
Crocs (CROX) Company Profile: Crocs designs and markets consumer products, mainly casual & athletic shoes & shoe charms, from specialty resins referred to as Croslite. Current Share Price: $17.19 (Jan. 6) 2010 Share Price Gain: 186% Comeback Story: Crocs was poised to be the ultimate fashion fad of the 2000s, with the contempt for the footwear rivaling the evangelical following Crocs shoes garnered. After going public in 2006 for roughly $17, Crocs shares jumped to nearly $70 in October 2007 during the fever pitch of the shoes' popularity. However, the retail environment wasn't friendly enough to Crocs, forcing the company to slash revenue guidance. After issuing lower-than-expected revenue and profit expectations in October 2007, Crocs shares dropped 30% in one trading session. By early 2009, Crocs was a penny stock. However, shares have rallied back to a 52-week high of $19.54 thanks to analyst optimism. For example, Sterne Agee analysts in October said they anticipate Crocs' wholesale revenue will grow at a double-digit percentage pace for at least the next two years. "It's starting to make sense to go back into Crocs. They seem to have turned the corner from before," Wilsey says. "The debt to equity is only 0.9. The company has no debt and a lot in cash and short-term investments. It was an educated risk because the company isn't going into bankruptcy." Michael Corbett, manager of the Perritt Emerging Opportunities Fund, notes that Crocs had similar characteristics to Heelys. "It was so far below book value that you had to think 'Are they actually going to burn through all the cash and go bankrupt?' It's the opposite of greed. There was fear it was going under. Is the fad going to come back? Probably not. But it's not going to zero." Hodges says Crocs was doing $240 million in sales per quarter, totaling almost a $1 billion sales business, but the backlash against the product proved to be too great for a time. "There was a backlash to the popularity and Crocs became a punch line," Hodges says. "I think I saw a skit on Saturday Night Live about Crocs. It went from one side to the other over the period of a year. But we realized that while they may not sell $1 billion of shoes every year, the underlying business has international opportunities and a bunch of new products." -- Written by Robert Holmes in Boston.
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