Sirius XM Up on Channel Launch - Analyst Blog

Leading satellite radio company Sirius XM Holdings Inc. SIRI has added two radio channels to its portfolio. Following this development, the company shares rose 2.5% yesterday.

One of the channels, Raw Dog Sirius XM Comedy Hits channel, will broadcast The Comedy Cellar show from Apr 10. The show will be hosted by comedians Dan Naturman and Noam Dworman, owner of the well-known Comedy Cellar Club.

The other channel to go live is Catholic Channel, which will run from Apr 21 to 27. This channel will cover the forthcoming canonizations of late Pope John Paul II and Pope John XXIII.

We expect these channels to help the company gain subscribers. In fiscal 2013, the company had 1.66 million subscribers, significantly above the projected 1.60 million customers. Continuous launch of innovative services are likely to act as tailwinds for the company while moving ahead.

Sirius XM is set to diversify its business model from a pure radio entertainment provider to a web-based safety and navigation information provider for cars as the company is facing competitive threat from several fronts. The iTunes online radio service of Apple AAPL coupled with Pandora's P streaming services for BlackBerry BBRY and Android-based smartphones will act as headwinds for the company going forward. Consequently, Sirius XM is partnering with major car manufacturing like Acura, BMW, Hyundai, Infiniti, Lexus, Nissan and Toyota in order to provide strong telematics services.

Sirius XM believes that new cars sold with satellite radios should reach 11 million in 2014 as against 10.7 million last year. The figure is expected to double in the next five years. As a result, Sirius XM remains highly optimistic about achieving nearly $100 million revenue in fiscal 2014 from its connected vehicle service business. Moreover, the acquisition of the connected vehicle services division of Agero is expected to be a long-term growth driver for the company.

Sirius XM currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other better-ranked stocks worth considering in this sector include AMC Networks Inc. AMCX, Entravision Communications Corp. EVC and Starz STRZA. All three currently carry a Zacks Rank #2 (Buy).