For much of 2006, it must have seemed as though the sky was falling for shareholders of XM Satellite Radio. The stock (symbol XMSR) had plunged from $30 to a little more than $11 before the opening of trading Tuesday. There were good reasons for the decline: Customers weren't renewing at anticipated rates, and the Federal Communications Commission was leaning on the company because satellite radio car receivers were interfering with FM reception in nearby vehicles.
But then Bear Stearns analyst Robert Peck issued a report that turned his "underperform" rating to "outperform." Peck figures that the bad news has largely run its course, and that the market has overreacted. It certainly reacted to his upgrade, as XM's stock soared 20% on Tuesday to close at $13.52. The rally spilled over to rival Sirius Satellite Radio (SIRI), whose shares climbed 3.6%, to $4.03.
Peck listed 12 reasons why XM's stock should perform better. On top of the list: XM and the FCC are about to reach an agreement on toned-down receivers that will still deliver great audio; sales at retailers are holding up and should pick up for the 2006 holiday season; the company has enough cash to get it through these tough times; and management is stronger. Also, despite shock jock Howard Stern's move to Sirius and Sirius's recent deals with the National Football League and Nascar, XM's programming is sound enough to maintain its audience's loyalty and attract new listeners.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Peck says his $17 target price on XM stock by the end of 2007 is based on conservative numbers. The company, for example, is predicting 18 million to 19 million subscribers by 2010, but Peck is figuring just 16.5 million.
Still, this is not a stock for chicken-hearted investors. Analysts, on average, expect XM to lose $2.63 a share this year and $1.79 a share in 2007. Peck is slightly less negative, seeing a loss of $2.61 per share this year and $1.52 next.
-
4 Money Habits Boomers Swore By That Millennials Are Walking Away FromMillennials are trading tradition for flexibility when it comes to building wealth.
-
Abu Dhabi Adventures: New Thrills, Iconic Sights and Disney’s Latest ParkDiscover the mix of culture, wildlife and modern marvels that make this Middle Eastern city a destination to watch.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for a Fall Interest Rate Cut by the FedA lot can happen between now and then, but the probability the Fed cuts interest rates in September is back above 80%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
-
How the Stock Market Performed in the First 6 Months of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have TodayBerkshire Hathaway is a long-time market beater, but the easy money in BRK.B has already been made.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have TodayProcter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
