Analysts like future of XM, Sirius


The long-suffering stocks of the dueling satellite radio outfits caught a bid last week after each reported lower losses than Wall Street anticipated and affirmed that they are still adding subscribers at a healthy clip.

A more bullish analyst, Thomas Eagan of Oppenheimer, has a price target on Sirius Satellite Radio that infers a near doubling in the next 12 months. For XM Satellite Radio shares, he predicts even more upside.

"Sirius has shown exceptional ability to understand and market to its audience," Eagan said.

Of the competition, he said: "We expect XM to maintain its lead in the industry for the foreseeable future."

Sirius had about 5.1 million subscribers at the end of the third quarter compared with XM's 7.2 million.

Eagan's target price on XM stock is $32.50 and is $8 on Sirius. Shares closed at $13.65 and $4.11, respectively, on Monday.

Risks, of course, abound, not the least of which is that digital music players like Apple Computer's iPod and, beginning today, Microsoft's Zune might be discouraging consumers from trying out commercial-free pay radio.

Credit Suisse analyst Bryan Kraft is a bit less bullish than Eagan but still ranks XM an "outperform" with a $17 target.

While XM's quarterly financial report generally impressed analysts, Kraft called it "lackluster." But he said the current share price reflects "relatively low XM expectations for future subscriber growth."

He also sees "some probability of a merger with Sirius," which would be a bullish development.

Banc of America Securities analyst Jonathan Jacoby likes XM but not Sirius, partly because Sirius has fewer subs but a higher market capitalization than XM.

"The valuation gap between XM and Sirius should narrow as we head into '07," he said.

He also said that Sirius might have a difficult time reaching its 6.3 million year-end subscriber target, whereas XM has repeatedly lowered its targets, most recently to 7.9 million subs, a number with which Wall Street seems content.

Jacoby has a $3.50 target on Sirius shares and a $17 target on XM.

One wild card in that analysis is NASCAR, which will make the move from XM to Sirius next year.

Oppenheimer's Eagan, in fact, said one reason Sirius management remains confident they'll hit their subscriber target is because of NASCAR. And, while it's been a while since star talker Howard Stern arrived at Sirius, bringing a whole lot of his listeners with him, 10 months later he's still marketing the product like a madman.
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