XM: Surprisingly Few Surprises In Q1 Results

XM Satellite Radio (XMSR) yesterday morning reported first quarter results that were almost exactly in line with expectations; the company had revenue of $264 million, which was precisely what the Street was expecting. The company ended the quarter with 7.9 million subscribers, and said it recently topped the 8 million subscriber mark.

The company repeated its previous guidance for year-end subscribers of between 9 million and 9.2 million, and subscription revenue in the $1 billion range. XM also repeated its previous forecast that it will reach positive cash flow from operations in 2008.

“XM’s Q1 results held few surprises,” comments Craig Moffett, of Bernstein Research. “But perhaps that, in itself, is a surprise. And it was ample for beating low going-in expectations.”

Moffett repeated his recent recommendation that investors play XM as a relative valuation play, and pair a long position in XM with a short position in Sirius Satellite Radio (SIRI).

On the company’s conference call, XM CEO Hugh Panero put up a brave face about the pending merger with Sirius, which the Street increasingly seems to think won’t happen. “We continue to believe we will ultimately receive the necessary approval to proceed with the merger and that it will be a big win for both consumers and shareholders,” Panero said. But he quickly hedged his bets: “We also need to emphasize that, even without a merger, XM is well positioned to be a strong and enduring leader in the audio entertainment category.”

XM shares yesterday jumped 89 cents to $11.90; Sirius was up 12 cents at $2.95.