XM Satellite Radio vs. Sirius Satellite: Which Stock to Buy?

Continuing with the rivalry that every oligopoly sector provides, I will try and tackle the radio industry this update. However, while my other contests have been focused on the technical and fundamentals of each company, this update will be a little different as finding a winner will not be so rudimentary.

Looking at the radio giants of XM Satellite Radio (XMSR) and Sirius Satellite (SIRI), the positives and negatives are not as transparent as originally desired. Speaking in terms of fundamentals, it does seem like XM has the slight advantage. The company has the potential, according to Yahoo Finance, to grow over 25% over the next five years and grow almost 14% this year. Compared to Sirius?s potential growth of negative 28% this year and a growth only limited to 20% there might be an advantage to buy XM in the long run. However, what is interesting to note is that out of the last nine actions committed by financial institutions, XM has been downgraded six times, while during the last eight actions of Sirius, the company has been upgraded six times. Such statistics post a conundrum for investors with fundamentals spread all over. In terms of actual data, both companies have posted numbers surprising investors in a negative way. Three out the last four earning results, XM has failed to even meet earnings expectations illustrating a possible slowdown in terms of margins. Sirius did only slightly better only failing to meet expectations two out the last four reports. Margins for both in terms of revenue are both similar and adequate, but profit has been negative for over three years severely underlined by poor cash flow from operating margins and other areas. Therefore, the numbers for both companies may not be completely reflected over the power each contains in its industry, but do not provide any relief for investors looking to get into to one of these stocks.

In terms of technical analysis, both again seem to provide a conundrum in terms of a better buying opportunity. Since 2003 Sirius has grown about 100% in terms of potential capital gains. However, such a statistic is flawed as the reflection of increased fluctuations during the period makes this stock too volatile to properly invest in. There is also an important notation that the stock also decreased 50% in value during one year in 2002 illustrating the difficult nature of buying this stock at the right time. Sirius currently also looks like it has reached its maximum level at about 12.00 and does not provide much upside. Like Sirius, XM had its own increase of nearly 900% during the run from 2003 to 2005. However, since then the stock has been on the decline falling nearly 50% worrying investors if the stock will ever rise again.

Nevertheless, while some investors may argue that this is the perfect time to invest in an oversold equity, when looking at the potential recession in sight and the idea that such radio brands produce luxury items, there is little assurance that the stocks will rise to its glory days. Personally, I think the radio industry is a dying one with little potential to grow in the next five to ten years. Such a sentiment along with the technical and fundamental facts have allowed me to stay clear of both equities as I do not see any encouragement from any of the factors which makes me want to buy either Sirius or XM Radio.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr