Analysts bullish on satellite radio
Analysts bullish on satellite radio
May 3, 2005
On Nov. 16, 2004, one day before Sirius Satellite Radio announced the hiring of chief executive Mel Karmazin, its shares were selling for $4.71. Befitting of Karmazin's status as a superstar CEO, it took the stock just 14 trading days to romp 91% higher and pierce the $9 mark.
Fast-forward five months and Sirius shares are trading right back down under $5, about where they were before Karmazin joined. No matter. That just spells opportunity, according to some analysts.
Sirius is "the pink elephant that terrestrial radio shouldn't ignore," Vintage Research analyst Alden Mahabir wrote after Sirius reported last week that it added more than 305,000 new subscribers in the first quarter. Sirius also said it will finish the year with 2.7 million subs, up from a previously estimated 2.5 million.
"The industry's impressive sub growth doesn't seem to be showing signs of letting up, making it easy for us to affirm our bullish stance on satellite radio and Sirius shares," the analyst wrote.
For XM Satellite Radio shareholders, things have been much worse, perhaps translating into an even bigger opportunity. XM shares in the same time frame (mid-November to the present) have sunk more than 25%.
"We have contended that a volatile stock price pattern is to be expected, although the extent of this slide was greater than we thought was likely," Barrington Research analyst James Goss wrote. "We consider current trading levels to be a buying opportunity for this still-evolving story."
Like Sirius, XM reported last week strong subscriber growth, saying that it added more than 541,000 new subscribers in the first quarter. But, unlike Sirius, XM stuck to its previous prediction that it would end the year with 5.5 million subscribers.
While some analysts who have been bullish on Sirius noted their disappointment that it captured just 35% of new satellite radio subscribers, leaving XM with 65%, Sirius management muffled that concern by explaining there were product shortages that depressed subscription additions to the tune of about 35,000 in the quarter.
In the important aftermarket category, where consumers purchase radios to put in their cars as opposed to purchasing a car with satellite radios already installed, Sirius said it will be at parity with XM by year's end.
Either way, the sector is booming, wrote analyst Mahabir: "If 2005 guidance holds for both companies, the industry would add 4 million subs, a solid feat, speaking volumes about the industry's potential."
Fast-forward five months and Sirius shares are trading right back down under $5, about where they were before Karmazin joined. No matter. That just spells opportunity, according to some analysts.
Sirius is "the pink elephant that terrestrial radio shouldn't ignore," Vintage Research analyst Alden Mahabir wrote after Sirius reported last week that it added more than 305,000 new subscribers in the first quarter. Sirius also said it will finish the year with 2.7 million subs, up from a previously estimated 2.5 million.
"The industry's impressive sub growth doesn't seem to be showing signs of letting up, making it easy for us to affirm our bullish stance on satellite radio and Sirius shares," the analyst wrote.
For XM Satellite Radio shareholders, things have been much worse, perhaps translating into an even bigger opportunity. XM shares in the same time frame (mid-November to the present) have sunk more than 25%.
"We have contended that a volatile stock price pattern is to be expected, although the extent of this slide was greater than we thought was likely," Barrington Research analyst James Goss wrote. "We consider current trading levels to be a buying opportunity for this still-evolving story."
Like Sirius, XM reported last week strong subscriber growth, saying that it added more than 541,000 new subscribers in the first quarter. But, unlike Sirius, XM stuck to its previous prediction that it would end the year with 5.5 million subscribers.
While some analysts who have been bullish on Sirius noted their disappointment that it captured just 35% of new satellite radio subscribers, leaving XM with 65%, Sirius management muffled that concern by explaining there were product shortages that depressed subscription additions to the tune of about 35,000 in the quarter.
In the important aftermarket category, where consumers purchase radios to put in their cars as opposed to purchasing a car with satellite radios already installed, Sirius said it will be at parity with XM by year's end.
Either way, the sector is booming, wrote analyst Mahabir: "If 2005 guidance holds for both companies, the industry would add 4 million subs, a solid feat, speaking volumes about the industry's potential."
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