Teens don't like satellite radio, analyst says
Posted
Jun 19 2008, 03:25 PM
by
Kim Peterson
Rating:
A Goldman Sachs analyst dropped a bomb on Sirius and XM Satellite Radio today with a pessimistic report that caused both stocks to plunge. At the heart of analyst Mark Wienkes' report is this: Young people have no need for satellite radio. By 1 p.m. PT, Sirius shares had fallen 14% to $2.08 and XM shares were down nearly 18% to $8.55.
Kids today are less interested in satellite radio, Wienkes writes, what with iPods, iPhones and other music players out there competing for attention. On top of that, the cash flows of both companies are in decline. Wienkes expects larger losses from both in the future and now rates XM a "sell" and Sirius a "conviction sell." In other words, call your broker immediately.
I have no doubt that young people aren't buying satellite radios. Cell phones, iPods and Web sites like MySpace serve up a well-rounded musical diet for most teens. Radio over cell phone is headed for the mainstream as well. There's no need for more. But does that justify such extreme dumpage today? Sirius and XM are going after a different market, focusing heavily on new car buyers. But fewer new cars are coming off the assembly line these days, Wienkes wrote, and satellite radio faces continued weak retail sales.
He made a few additional points:
--Streaming audio on Apple's 3G iPhone has the potential for strong demand.
--The average revenue per satellite radio user is declining.
--The amount of user turnover is increasing.
--New "a la carte" satellite radio pricing will not impact demand for the product.
Related reading:
XM and Sirius get big endorsement
Sirius: Merger or Chapter 11
If Sirius has to be sold, who will buy?
XM plus Sirius doesn't equal monopoly?
