Wednesday, May 31, 2006

S&P "de-couples" XMSR and SIRI

May 31, 2006

XM, Sirius Reflect Differing Investor Sentiments
Maya Roney, 05.31.06, 3:07 PM ET

"Standard & Poor's Equity Research downgraded shares of XM Satellite Radio to "sell" from "hold" and cut the price target to $8 from $12, citing the company's recently reduced guidance.
Last week, XM trimmed its 2006 subscriber additions estimate to 2.6 million from 3.1 million, expecting to now reach a total of 8.5 million subscribers by year end. The company reaffirmed its expectations for positive free cash flow by the fourth quarter of 2006 and for full 2007.

"We see investor confidence undermined by reduction in XM's estimate[s]," wrote analyst Tuna Amobi in a research note Wednesday. Amobi said he is now more wary of new disclosure on retail shipment disruptions arising from the FCC's finding of non-compliance with emission limits for popular plug-and-plays SkyFi2, and Audiovox Xpress.

The analyst also cited a pending shareholder suit and copyright suit against XM's Inno portable as reasons for the downgrade. Meanwhile, Amobi reiterated a "strong buy" rating and $8 price target on shares of Sirius Satellite Radio.

As XM trimmed its outlook amid mounting regulatory issues, Sirius reaffirmed its 2006 target of over 2.8 million net subscriber additions to over 6.2 million by the end of 2006.
"While satellite radio seems to us vulnerable to investor sentiment, we see Sirius' shares unfairly affected by recent woes of rival XM Satellite Radio," he said.

In addition, Amobi sees senior management's confidence in the underlying business further demonstrated by chief executive officer Mel Karmazin's recent addition of 1 million Sirius shares to his 5-million holding."

Link: HERE

5/31/2006 07:28:00 PM

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