Dish network lost subscribers and the stock price appreciated by 20%. Sirius XM lost subscribers and the stock price plummeted by a like number. In fairness, Dish posted a better than expected profit (that was crystal clear) as well. Sirius XM, with the exception of one time costs on the Liberty Deal, would have posted a better than expected loss. The difference between what happened to Dish and what happened to Sirius XM rests in expectations and the fact that Dish is making a profit. Is Sirius on a road that is similar to Dish? Only time will tell.
There are perhaps some lessons in the Dish earnings report for everyone. First and foremost was the expectation level. With Dish, although subs were lost, the expectation was that the loss would be greater. With Sirius XM, most expected a subscriber decline, but with very few exceptions, most were expecting the number of deactivations to be smaller than it actually was. Perhaps, given the variables in how subscribers are counted at Sirius XM, there will always be confusion, and that confusion will; always breed an uncertainty in the confidence of investors in the subscriber numbers.
In fairness to Sirius XM, the company warned of potential impacts of the Chrysler and GM situation. However, the real question is whether or not anyone has taken heed in that warning and adjusted their expectations. The company will be fortunate if Chrysler adds a number of subscribers near 100,000. I do not think most people grasp the levity of that situation.
All of that being said, is there a point in time where Sirius XM can have quarterly results that bring an upswing to the stock? Likely that is still several quarters away, and while my opinion wont be popular among satellite radio equity fans, it is an opinion that is grounded in reality. Although adjusted EBITDA is projected to be at $350 million for 2009, there are still capex and interest expenses that are a reality and will be a weight on the stock.
What I would like to see the company do is hold an investors/analysts day. Invite analysts to the headquarters, and present a webinar that investors can view outlining metrics, deal structures, and projections. Offer up what they are based on, and get everyone on the same page with a much better idea about how to track things. The smart participants will build their respective models, and continue to update and cover the equity in a manner that generates realistic expectations.
Sirius XM has a passionate following that loves to delve into the information. One problem is that with the merger, a virtual blending happened and it has left may guessing or using poor assumption. I realize that much of the information is there if someone would take the time to find it, but why not just simplify it and get it all on the table.
If Dish Network proved one thing, it is that despite a poor economy and dropping subscribers, revenue and stock price could bot appreciate. In my opinion there is potential for Sirius XM to be on a similar path, but it needs to start with clarity.
Position - Long Sirius XM Radio, No Position Liberty, No Position Dish.