Satellite Radio Starting to Take Off

Is it possible to find a fast-growing, strengthening, subscriber-based business in these troubled times? Barron's says that XM Satellite Radio (XMSR) is ready to deliver faster than expected subscriber growth--and I think they have got it right. I will be adding a couple thousand shares to my portfolio now that its leadership and funding has been clearly established. Sure enough, the company beat its own estimate for new subscribers this quarter. It's competitor, Sirius (SIRI) suffered a blow when the world's largest automaker, General Motors, chose to use XM satellite radio exclusively. Honda and others have also joined XMSR, propelling it to grow much faster than the weakened SIRI, who may not even be able to hang onto its supply deal with Ford, and may not be viable as a standalone business. Sirius (SIRI) has some 'serious' problems--it offers fewer channels and fewer options to subscribers, and is just not picking up momentum in revenue or new subscribers. XM needs about 3 million subscribers to breakeven, and has already exceeded the 500,000 mark in just a few short months. Consensus (although only few are covering the stock) estimates about one million subs at year end. I believe this number will come in around 1.3 to 1.5 million, given the accelerating dominance over its only weakening competitor, the cheap ad environment, as well as the growing non-auto and rural user base XMSR is executing by lowering subscriber acquisition costs, hitting faster than expected subscriber growth, and by having secured a competitive dominance that will be extremely difficult to displace. I feel the stock has some significant risk, but will likely hit $12 or more in the next 12 months--double its current price. The increased analyst attention to the emergence of a winner will follow as XMSR will continue to exceed revenue and subscriber estimates.