Until a decision on XM Satellite Radio Holding (NASDAQ: XMSR)'s hoped-for merger with Sirius Satellite Radio Inc. (NASDAQ: SIRI) is made, both companies are forced to proceed independent of one another. While wishing for the best, the companies must also prepare for the worst, should they lose their hope for synergy. Part of the companies' continued day-to-day operations include visiting the earnings confessional once a quarter. XM's turn comes tomorrow after the closing bell. According to Zacks, the consensus analyst estimate stands at a per-share loss of 44 cents, with the high end at a 40-cent loss and the low end at a 52-cent loss. This is a decline from a year-ago loss of 32 cents, which positively surprised the Street's consensus view by a healthy margin.
As the firm heads under the earnings spotlight, the shares appear to be bottoming out from a technical perspective. After tiptoeing along the 9-10 range for several months, XMSR has broken out into double-digit territory, gaining nearly 50% since mid-August. This month, the equity has taken out its 10-month and 20-month moving averages. A monthly close atop these long-term trendlines would be the first of its kind since September 2005.
This recent rally could be raising the perspiration levels of short sellers. Currently, about 7.6% of the equity's available float for public trading is devoted to the short side. Continued upside in the shares could force the hand of these bears, resulting in a short squeeze that yields additional buying power for XM.
And in the event of another positive earnings surprise, what can we expect from analysts? Currently, Zacks ratings show five "strong buy" designations, one "buy," 10 "holds," and a lone "strong sell," leaving plenty of wiggle room for upgrades (or downgrades). But it's likely that many of the covering analysts may be holding firm until the final merger decision hits the airwaves, so to speak.
Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
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Reader Comments (Page 1 of 1)
10-25-2007 @ 7:51AM
john said...
In a nation run by corporations that loath competition, the idea that the XM~Sirius merger should be stopped stains credulity. The reality is that the reason the government opposed it in the first place is not because it is anticompetitive, but just the opposite. It might actually provide a very competitive choice and prosper in a world where the public airwaves have been polluted by local radio (less NPR) under the approving eye of the government. John
10-30-2007 @ 9:05PM
Mort said...
All I know is that people who are getting XM with new cars... ABSOLUTELY LOVE IT.