WRSP

Worldspace Satellite Radio‘s recent financial results and subscriber numbers have been improved, but the company’s stock price has been taken on a short roller coaster ride throughout the past week following the release of several research reports.

Worldspace, a provider of subscription-based satellite radio services in Asia, Western Europe, Africa and the Middle East, entered the public market in August, pricing its initial public offering at $21 per share, but the stock has closed at more than $20 only four times since its debut and last saw the $15 mark in September.

Analysts expect the stock to linger below the initial public price for a while longer, and Worldspace shares suffered a sharp decline late last week, falling from a closing price of $11.52 March 16 to $8.89 March 17 after the release of an unfavorable investor note from Tom Watts, managing director of institutional research for SG Cowen & Co.

Watts downgraded the stock of the satellite radio provider from outperform to neutral and said the company faces higher risks due to its debt. "We cannot recommend purchase until acceptable price points and churn rates become more apparent," Watts said in a research note for investors.

Worldspace shares continued to slide throughout the following two days, bottoming out at $5.95 March 21 before the company was given a brief reprieve. UBS maintained its buy rating on Worldspace in a March 22 note, calling the stock sell off unjustified. The stock climbed the next two days, closing at $6.91 March 23.

The drop in share prices offset some recent good news for Worldspace, which reported that it had cut its net loss from $577.4 million in 2004 to $79.7 million in 2005, as total revenues jumped 36 percent to $11.7 million in 2005. Worldspace credited the gains to its push in India, where the company rolled out service in nine cities throughout 2005, helping the satellite radio provide to cross the 115,000 mark in subscribers.

"2006 is a pivotal year for Worldspace," Noah Samara, the company’s chairman and CEO, said in a statement. "We are working hard to gain key regulatory approvals for the delivery of mobile services in certain of our markets and to increase the variety of our receivers. We are moving into more cities in India and we are gaining strength in other countries where subscribers can be added at little incremental cost."

SIRI

Sirius Satellite Radio announced March 20 that it has surpassed 4 million subscribers, which Robert Peck, an analyst with Bear Stearns, said is ahead of projections.

The satellite radio provider finished 2005 with 3.3 million subscribers, which would put additions in the first quarter to date at 683,000, which is significantly ahead of our 665,000 estimate for the full quarter, Peck said in an e-mail to investors. Bear Sterns has Sirius stock rated at outperform.

Peck said Sirius’ goal of 6 million subscribers by the end of 2006 "could be an easy target," as the company tries to maintain the momentum it gained from the addition of Howard Stern. "Assuming that about 20 percent of the net adds for the year are added in [the first quarter], and only about 400,000 subs added in [the first quarter 2006] were organic (i.e. not attributable to Howard Stern directly), we think Sirius could easily add 2.7 million subscribers in the year to pass the 6 million subs milestone."

Peck also expects strong performance for Sirius from its deals with Daimlerchrysler and Ford, which are planning increased deployments of Sirius radios as original equipment in 2006.

Sirius recorded revenue of $242.2 million in 2005, compared to revenue of $66.9 million in 2004, the company reported Feb. 17, while the company’s net loss of $863 million in 2005 was up from a loss of $712.2 million in 2004, driven by a 101 percent increase in subscriber acquisition costs.

The company’s stock closed at $5.11 March 20, moving back above the $5 mark for the first time since early March.

"While the shares have been trading at close to 52-week lows recently due to lack of near-term catalysts, we think investor focus likely could shift towards execution," Peck said. "Given Sirius’ continued performance vis-a-vis stated objectives which improves credibility, currently depressed valuations could prove to be an attractive entry point for the patient investor."