Jacoby at it Again! (Doesn't Mary Crane get tired of writing this story?)
Forbes Market Scan
Retail Sales Still A Worry At XMMary Crane, 06.14.06, 4:41 PM ET
Satellite subscriber numbers remain at risk amid a soft retail environment even though shipments have resumed on several XM Satellite Radio models, according to a report from Banc of America analyst Jonathan A. Jacoby.
Jacoby said XM's RoadyXT satellite receiver got a clean bill of health from an outside consultant who said it met the Federal Communications Commission's emission standards.
The commission can now grant the RoadyXT a new FCC ID, which XM hopes it will also receive for its SKYFi2, Sportscaster and Xpress radios over the next few weeks.
FCC compliance was attained, in most cases, with the addition of a 25-cent part added to the radios, whose receivers' FM modulator -- used to transmit satellite radio programming over an FM radio frequency -- exceeded FCC limits.
According to the analyst, the company has resumed shipments of its RoadyXT, SKYFi2 and Sportscaster radios based on outside tests that demonstrated the units were in line with FCC standards. Shipments of the Xpress will also likely resume over the next few weeks.
Despite this good news, however, second-quarter subscriber numbers remain at risk, given the weak retail environment. "Although a speedy resolution to the FCC issue is a mild positive, it is only the first step toward regaining momentum at retail."
Jacoby said he expects XM's gross subscriber growth to be flat, versus last year's second-quarter growth of 393,000. Sales could improve in the month of June, which accounts for about half of the second quarter's retail sales and includes Father's Day, which makes up about 30% of the quarter's sales. Still, Jacoby said he still believes there is downside risk to his 417,000 net subscriber additions estimate.
Despite that, the analyst maintained a "buy" rating and price target of $25 on XM and recommended it over Sirius Satellite Radio, rated "neutral" with a $5 price target. "XM finally appears to be regaining its footing, while the expectations for Sirius may be too high," he wrote in a research report Wednesday.
6/14/2006 09:15:00 PM
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