“Recent channel checks with our buying sources continue to indicate a much weaker sales environment than last year for satellite radio,” Jacoby wrote.
Jacoby adds that Sirius’ management - i.e., Mel Karmazin - “seems focused on talking of the benefits of a merger…as opposed to [the] current weak retail environment.” Jacboy says he does not think the FCC and DOJ are ready to approval a merger of the two companies, and adds that a Democratic-controlled Congress is “less favorable to media mergers.”
He concludes that the stocks “may be in need for a breather” after a recent run up. Jacoby says he believes that valuation gap between the two companies will narrow, noting that XM’s partners account for about 60% of U.S. auto sales, compared with 40% for Sirius’ partners.
Jacoby maintains his Buy rating on XM and Neutral rating on Sirius.
XM shares on Monday fell 83 cents to $14.44; Sirius was off 15 cents to $4.11.