This Week in Sirius XM Radio

Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  ) slipped 3.4% to close at $3.12 on the week, bucking Nasdaq's slight 0.4% pop. That was the stock's largest weekly drop since its 11% plunge during the second week of May last year, and it's a testament to how smoothly the rally has gone since Liberty Media (NASDAQ: LMCA  ) began building up its stake nearly a year ago.

There was more going on beyond the share-price gyrations, though. The media giant posted its latest quarterly results on Tuesday morning. Piper Jaffray reiterated its bullish support shortly after the financials were revealed. And rival Pandora (NYSE: P  ) posted problematic streaming metrics for January.

Let's take a closer look.

Quarter pounder
Sirius XM's earnings report was the top story, so let's start there. Fourth-quarter results were solid. Revenue growth moved 14% higher to $892.4 million, and earnings more than doubled to $156.2 million. The performance was largely in line with expectations, and the stock could have very well moved lower on the week merely because the shares have been such strong performers lately.

Even after this past week's dip, though, Sirius XM is trading 13% higher than it was at the time of its third-quarter report three months ago and 45% higher than it was when it served up its prior year's fourth-quarter financials. Investors had already known that Sirius XM closed out 2012 with its strongest year of net subscriber additions since the merger of Sirius and XM.

There were still a few fresh interesting metrics in the report. On the positive side, monthly churn fell to 1.8%. At a time when the market's wondering whether subscribers are on edge after last year's core rate increase, Sirius XM proves that its retention is strong.

On the negative side, seeing average revenue per user shrink from $12.14 a month during the third quarter to $12.12 this time around was a bit of a surprise. Weren't more people rolling in with the new rates? Shouldn't more receiver-based premium members be upgrading their plans by paying $3.50 a month more for streaming access?

The company still posted an overall encouraging performance, setting the stage for a promising 2013 regardless of what Liberty Media's intentions may be now that it has secured majority control of the company.

Following the Piper
There wasn't a lot of analyst movement on the report, and understandably so. Some of the juicier nuggets and the company's initiation of guidance for 2013 were unveiled last month.

However, at least one major analyst had something positive to say about Sirius XM. Piper Jaffray is keeping the media leader as its top large-cap idea for 2013, encouraging Sirius XM's healthy subscriber growth. The firm is sticking with its "overweight" rating and its $3.40 price target.

We may have hit peak Pandora
Pandora has been kind enough to provide investors with monthly growth metrics. One can argue that the country's leading music-streaming platform is doing this only because the data is flattering.

Well, let's see if the numbers keep coming now.

Pandora announced its January metrics on Wednesday. The performance looks promising on a year-over-year basis. Bringing out 65.6 million active listeners last month -- 38% ahead of where it was a year earlier -- is great. Reporting that listener hours have popped 47% to 1.39 billion over the past year is even better.

However, a quick sequential comparison with Pandora's numbers in December paints a different picture. The number of active listeners fell from 67.1 million in December, and Pandora served up the same 1.39 billion hours.

One can always argue that there are seasonal factors to consider here, but that only means we can check a year earlier to make sure. As it turns out, between December 2011 and January 2012, the number of active users remained flat at 47.6 million and listener hours grew from 906 million to 952 million.

In other words, Pandora fell short on both marks this time around.

Media giants on the clock
There may or may not be a lot of Sirius XM-specific news in the week ahead, but other leaders of premium entertainment will be busy. Comcast (NASDAQ: CMCSA  ) , the country's largest cable TV provider, reports on Wednesday. DirecTV (NASDAQ: DTV  ) , the nation's biggest satellite TV company, follows on Thursday.

Sirius XM bears often bring up Comcast and DirecTV in making valuation arguments against Sirius XM. We'll probably see this new week why that's a bad idea. Comcast has been shedding video customers for several quarters now. DirecTV is one of the few premium TV companies tacking on new accounts, but it's not going to be growing as quickly as Sirius XM.

Analysts see both Comcast and DirecTV growing revenue in the mid-single digits for the holiday quarter. Both companies are benefiting from their ever-increasing rates, and Comcast is offsetting the decline in video customers by growing its bundled plans that include phone and Internet connectivity. However, unlike Sirius XM, which is able to largely control its programming costs and has been able to keep that line item in check, Comcast and DirecTV are at the mercy of networks and broadcasters that continue to demand more money.

Sirius XM will never be able to command the kind of monthly tabs that pay TV companies do. Consumers don't value audio the way they do video. However, having DirecTV and Comcast chime in should provide a strong reminder on the scalable power of satellite radio.

Tune in. Another interesting week is on the way.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 10, 2013, at 7:36 PM, MUSCLE13 wrote:

    "Comcast and DirecTV are at the mercy of networks and broadcasters that continue to demand more money."

    Rick - You do realize that Comcast owns NBC and the largest collection of cable networks in the country, right?

  • Report this Comment On February 10, 2013, at 9:24 PM, MUSCLE13 wrote:

    Not to mention Telemundo as well.......

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