SIRI Chart SIRI data by YCharts

Sirius XM Radio ( SIRI)

Background: Sirius XM Radio provides satellite radio services in the U.S. and Canada. The company broadcasts approximately 135 channels, including music, sports, entertainment, comedy, talk, news, traffic, and weather channels on subscription fee basis through two satellite radio systems. Sirius XM trades an average of 58.2 million shares per day with a market cap of $16.4 billion.

52-Week High: $3.15

Beta: 1.66

Price to Book: 3.85

I have followed SiriusXM on and off now for almost two years. Sirius is a fun stock because the Internet is always buzzing about investors who bought at next to nothing and watched it come back from the dead.

I never shorted Sirius, but I made money selling call options many times. Sirius trades at an unusually large price-to-earnings ratio due to the large perma-bull base of investors.

As a result of so many hard-core investors, you can't look at the metrics and dismiss Sirius as overpriced out of hand. Otherwise, you run the risk of not giving Sirius the full attention it warrants.

Also, unlike most stocks that trade for less than $5, Sirius doesn't appear to be a bankruptcy candidate (any longer). At the same time, don't expect to get rich from buying Sirius at this level because it is right on the edge of being controlled by Liberty Media ( LMCA), and there are more than five billion (yes with a b) shares in the float for a market value of nearly $18 billion.

With $18 billion chasing earnings of $400 to $500 million a year, the upside is limited but still acceptable on a percentage basis. Look for a buying dip near $2.95 as an entry target. For the bearish thesis, the super-sized valuation has not been lost on the shorts.

Short interest is near 10% and short sellers should not be ignored. That said, they are under pressure and underwater with the price at yearly highs. If shorts decide to say uncle and exit, they may push the stock price up even further if enough of them decide they had enough at once. SIRI Revenue Per Share TTM Chart SIRI Revenue Per Share TTM data by YCharts

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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