While Sirius Satellite Radio (SIRI) posted decent Q3 subscriber growth stats yesterday — 50% y/y growth — Goldman Sachs analyst Mark Wienkes thinks the stock is headed south. Specifically, he thinks shares will trade around $2.25 in a year — about 33% below today’s $3.40 price. Why?
- While Sirius beat Wienkes’ net subscriber additions estimate by about 20%, revenue just matched his target.
- This is a sign of things to come as Sirius and rival XM (XMSR) sign up fewer customers through retail sales and more through less-lucrative “OEM” sales, where radios are built into cars.
- Sirius’ 525,000 Q3 net new subs included only about 64,000 retail net adds versus 206,000 a year ago (down 69% y/y) and 130,000 in Q2 (down 51% q/q). Translation: Sirius’ retail channel bombed last quarter (despite all sorts of new products).
- As the shift to OEM sales continues, Wienkes thinks XM is in better shape than Sirius: it has a larger share of the OEM market. Therefore, if the retail channel gets weaker, he thinks it will impact Sirius more than XM.
- iPods are kicking satellite radio’s butt.
- Wienkes estimates only a roughly 30% chance the XM merger will go through.
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