Fondos.Net - XM Radio Stock

XM Radio Stock

XM Satellite Radio Holdings, sells its services as “digital radio for lovers of pure sound with no annoying advertising pollution”. XM Radio offers 120 stations transmitted over two satellites in orbit above the United States. The main target audience is the huge number of people who listen to music on the radio but there are services offering news and sports too along with other general entertainment including programming especially for children. Specialized music stations include classical, country, pop, R&B, and dance - news services are mainly in conjunction with CNN and CNBC as are sports. Specialist programming for children comes from Radio Disney and Playboy Radio provides for adult audiences.
With its advertising free ethos, XM Radio’s revenue is entirely from subscriptions to its services - the choice for the listener then is paying for a service without advertising or have your radio free but with constant interruptions. Marketing is mainly through car manufacturers - General Motors and Honda are involved - and through electronic material/equipment retailers. The main thrusts of the marketing effort are the superior quality of the digital broadcast and the interruption free music or speech.
XM Radio has grown rapidly. Its revenue for 2001 was only just over half a million dollars but by 2004, that had become $244 million. The business has yet to record a profit, losses in the last full year showing over $642 million. It’s not therefore surprising that the stock is not buoyant and no dividends have been declared In any case, Hughes Electronics and H.G.Weaver hold the bulk of the shares. The price has been stable over several months now, hovering in the $20-$30 zone most of the time. There was a low of just over $1 in November 2002 but, after the recovery from that, there have been no major peaks or troughs. In spite of the apparently poor past performance, analysts are recommending this stock as a “buy”. Targets are a low of $30 with a high of $55 - the mean is $40 from nine brokers. The current price is between £35 and $36. The decision then (apart from whether or not to give any credence to the experts) is about the tastes of the American listener. There’s certainly something for just about everybody on XM Radio but that’s only a small part of it.
Are people so used to commercials on the radio that they’re not bothered by them and aren’t going to be willing to pay to be rid of them? There is of course, the more discerning listener who wants to listen to his or her music with the quality of digital sound and without the aggravation of the commercials who might be prepared to pay the monthly subscription - that varies depending on how many services are taken. The experts seem agreed that the proposition is sound - the pun is intended - the notion that people will pay for better listening is sound and the decision to buy XM Radio stock would be a sound investment.

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