Zacks Equity Research recently downgraded their recommendation for Sirius XM Radio Inc. (NASDAQ:SIRI) from Neutral to Underperform. The company’s earnings barely met Zacks’ earnings estimates, and they
The company’s stock was downgraded due to a number of factors. Sirius said its forecasted net subscriber growth rate will drop this year, down from the Self-pay 1.66 million subscribers that were added in 2012. New subscriber growth rates are supposed to drop from 2 million 2012 to 1.4 million new subscribers in 2013.
The company’s stock price has increased by 73% in the last year. The analysts think it will decrease in the near future though, so the valuation metrics should converge with the S&P 500.
The analysts also have noted a number of concerns facing the company. The company’s growth is largely dependent on the auto industry. The company is counting on auto manufacturers to install Sirius XM into these cars. Right now, Sirius has about 70% of the market for new cars, but it also faces competition from Pandora (NYSE:P) and Spotify.
Additionally, the company lost its legal battle to try to counter Liberty Media’s takeover bid. Liberty Media already controlled 50% of the company, and it was uncertain whether there will be management changes. If there are huge changes, that could also affect the future of the company.
Sirius XM has come a long ways in the past few years as it was facing bankruptcy. The company is looking up, but it still has a number of challenges left to face. Investors should be aware of the downgrade rating and keep an eye on further analysis of the company.