24/7 Wall St. 2007 Price Forecast: Sirius, $3

Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high

Sirius Satellite Radio. (SIRI) Sirius has a big problem. Actually, it has several. But, for starters, it announced strong subscriber growth for 2006 and said it would be cash-flow positive in the fourth quarter of 2006. The stock did not move at at. It still trades at $3.71, down over 50% over the last year.

Sirius must now contend with the facts: Howard Stern has been with the company long enough so that he will probably not be responsible for a large influx of new subscibers. In other words, growth is likely to slow. Since the fourth quarter is strong in satellite radio due to holiday sales, Sirius can almost count on the fact that results in the first two quarters of 2007 will be less than spectacular.

XM, Sirius’s larger rival, missed its forecast for 2006, ending the year with a total of 7.6 million subsribers, below Wall St. estimates.While it is tempting to see this as good news for Sirius, it is not. A slowdown in any part of the satellite radion industry is a sign of slackening demand.

The debt load at Sirius could become a serious problem during 2007 if the company’s subscriber based does not increase at a torrid pace. The fact that there are two players in the satellite radio business naturally keeps down revenue-per-subscriber.

The number of devices that may compete with Sirius increase almost monthly. iPod, iPhone, Zune, multimedia phones from Motorola and Nokia. It’s a long list.

Sirius has shown its best and the market was unimpressed.

Factors that could move the stock above forecast: Sirius "outgrew" its rival XM last year. If that trend continues, the market will move money to the stock with the "hot hand".

Factors that could move the stock below forecast: If the market sees subscriber growth fall off after teh Howard Stern impact, Wall St. will want to know how SIRI is going to address this. They may have no answer.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.