Naughty or Nice: Sirius' 4Q Pullback
Like a lump of coal in your Christmas stocking, so too has the negative news about satellite radio's fourth quarter been revealed. This week, Sirius announced a serious pull back due to the company reducing its end-of-year guidance, and some think the news will have a ripple effect across the entire sector.
The fourth quarter has become a critical growth factor in satellite radio as the industry is increasingly becoming reliant on the gift-giving season for success. Even within the period, much of the market's growth is heavily back-end loaded - last year 44 percent of the quarter's volume, and 23 percent of the full year's, came barreling in during the last 10 days.
But for the full quarter, Bernstein Research's Craig Moffett said the implied weekly run-rate of Sirius' new guidance is 60,000-75,000 net additions per week -the company's prior guidance expected about 91,000. The results, the analyst said, speak to the "inherently escalating challenge" of meeting such high subscriber addition standards.
In an ironic twist, Moffett said the change in Sirius' guidance will likely impact XM shares just as much. "Much of the recent rally in XM owes to Sirius maintaining year-end guidance, (both companies) posting roughly similar Q4 gross additions (and) the odds looked good that XM would beat expectations in the current quarter." Now, he said, that logic is off the table.
Even still, Oppenheimer & Co. analyst Thomas Eagan said the Sirius pullback is a buying opportunity and continued OEM penetration and improving financials provide positive barometers for future operations.
(Used with permission)