Upgrade's Uplifting for XM

Satellite-radio providers were getting a lift Thursday after Credit Suisse upgraded XM(XMSR), the most-used name in the space, to outperform from neutral.

Analyst Bryan Kraft reiterated his stock price target of $17, saying the potential reward outweighs the risk now that XM has reduced its subscriber-growth guidance to a number that's more achievable.

Kraft also noted that gross subscriber-acquisition costs have retreated from higher levels. Shares of XM were recently up $1.13, or 9%, to $13.64.

In July, the Washington-based pay-radio outfit cut its year-end subscriber target to about 8 million. XM began 2006 with a goal of 9 million users by year end.

Kraft forecast a strong fourth quarter for XM in part because of declining gas prices, increased square footage devoted to satellite radio among retailers and the debut of Oprah Winfrey's channel on its service.

Rival Sirius(SIRI) was also trading higher, recently adding 10 cents, or 2.5%, to $4.13. Kraft reiterated an outperform rating on Sirius, but reduced his third-quarter subscriber addition estimate to 450,000 from 536,000, reflecting production cuts at Ford(F) and DaimlerChrysler(DCX).

Additionally, Kraft believes a merger between XM and Sirius would offer benefits for both, but "would make the most strategic and financial sense for XM shareholders."

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