Please ensure Javascript is enabled for purposes of website accessibility

Sirius Business

By Rick Munarriz – Updated Nov 16, 2016 at 5:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The satellite radio upstart continues to hook up new listeners.

It's not always easy being Sirius (NASDAQ:SIRI). Last night, the satellite radio upstart announced that it had surpassed the 400,000-subscriber mark. In a vacuum, that's great news. Every listener the company signs up is another step towards viability.

However, it's the upstart's misfortune to report this a week after rival XM Satellite Radio (NASDAQ:XMSR) announced that it had nearly 1.7 million subscribers. Yes, XM had a head start. So what?

Motley Fool Stock Advisor recommendations Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY), and Netflix (NASDAQ:NFLX) all were accused of having head starts, and no one seems to remember who came in second. And the fact is, XM signed up more than 320,000 new subscribers in the most recent quarter. It has taken Sirius nearly two years to get to 400,000.

Sirius does have a few advantages over XM. It does. It sports a stronger balance sheet. It has developed superior content programming when it comes to pro sports. Its satellite situation is more stable. It draws a larger sum when it comes to average revenue per subscriber. Those are valid strengths.

No, Sirius isn't doomed. This market will continue to grow as people become enamored with the prospect of commanding over 100 digital channels. There will be plenty of market-share pie to share. And while the steep losses by both players are troubling, they are par for the course during the customer acquisition phase.

As usual, it boils down to valuation. Is XM worth $4.2 billion? More importantly, with more than 1.2 billion fully diluted shares out there, is Sirius worth $3.7 billion? That seems like an awfully narrow margin given XM's considerable lead. It's not too often that a clear market leader isn't granted a more respectable premium. More often than not, it doesn't stay that way for long.

For more market leaders, check out Motley Fool Stock Advisor . Or tell us this: Is Sirius misunderstood or overvalued? Will the company catch up to XM? Which service do you prefer and why? All this and more -- in the Sirius discussion board. Only on Fool.com.

Longtime Fool contributor Rick Munarriz would gladly broadcast his opinion on more than 100 channels of digital radio -- if only someone would listen. He owns shares in Netflix but not of any of the other companies mentioned in this story.

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
SIRI
$5.81 (-1.02%) $0.06
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$226.41 (-4.49%) $-10.64
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.78 (-3.01%) $-3.53
eBay Inc. Stock Quote
eBay Inc.
EBAY
$38.19 (-0.29%) $0.11
XM Satellite Radio Holdings Inc. Stock Quote
XM Satellite Radio Holdings Inc.
XMSR.DL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.