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This Week in Sirius XM Radio

By Rick Munarriz – Feb 8, 2014 at 7:15AM

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Sirius XM Radio had a busy week of news.

Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (SIRI -2.65%) moved lower on the week, sliding 2.5% to close at $3.49. The media darling's dip contrasted with modest gains for the Dow, Nasdaq, and S&P 500 on the week.

There was more going on beyond the share-price gyrations, though. Sirius XM posted quarterly results, and it was treated to an analyst downgrade. On the streaming front, Pandora (P) also moved lower after disappointing investors with its fresh financials.

Let's take a closer look.

Earn, baby, earn
Sirius XM posted fourth-quarter results on Tuesday morning. We know by the lower stock price that the market wasn't wowed by the report, but let's take a closer look. 

Revenue climbed a better-than-expected 12% to top $1 billion. It's the first time Sirius XM hit 10 figures, two quarters earlier than Wall Street was forecasting. Its posted profit of $0.01 a share was half of what analysts were targeting, but once you back out one-time items and adjust for a more accurate tax rate, the satellite-radio king would have landed just ahead of where the pros were perched.

The market wasn't pleased with seeing monthly churn inch higher to 1.9% and the conversion rate slip to 42%, but that was partly explained during the subsequent conference call. Buyers of used cars are making up a larger part of the subscriber audience, and they convert less often after enjoying their free trials. The conversion rate for used cars was 34% during the quarter, compared with 44% for buyers of new cars with factory-installed receivers.  

Downgrade depot
Sirius XM's report didn't impress Wunderlich Securities analyst Matthew Harrigan. He downgraded the stock from "buy" to "hold," lowering his price target on the shares from $4.20 to $3.80.

He's concerned about Sirius XM's appeal as more cars rolls out with seamless access to Bluetooth connectivity to play free or nearly free Internet radio apps. He also thinks Liberty Media (FWONA) is unlikely to sweeten its buyout bid. 

That's an odd stance since, investors generally haven't been impressed by Liberty Media's terms to absorb Sirius XM, and Liberty Media needs a majority of shares outside its stake to approve the deal.

Cracking open Pandora's box
Pandora shares took a hit after the company posted mixed results. Revenue growth was roughly in line with expectations, and the leading streaming service cranked out the most profitable quarter in its history.

The problem at Pandora was its guidance as its top- and bottom-line outlook for 2014 fell well short of what Wall Street was forecasting. It also didn't help that it revealed a sequential dip in active monthly listeners in January. 

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Pandora Media and owns shares of Liberty Media. and Sirius XM Radio. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
$6.24 (-2.65%) $0.17
Pandora Media, Inc. Stock Quote
Pandora Media, Inc.
Liberty Media Corporation Stock Quote
Liberty Media Corporation

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