NEW YORK (TheStreet) -- Sirius XM (SIRI) - Get Sirius XM Holdings, Inc. Report stock is a fickle mistress -- alluring one day, moody the next; up one moment, then down again. And the week just passed was no exception.
Thus, for investors concerned about Friday's drop in Sirius XM share price, relax: analysts say that the share-price decline is nothing to panic about.
By midday Friday, Sirius XM stock had fallen by 7.2% to a little over $1, before righting itself to close out the day at $1.08, or a drop of 3 cents on the day. In doing so, Sirius XM stock closed above $1 for the third straight day -- a notable achievement for one very notable reason: Sirius XM hopes, of course, to remain above $1 long enough to satisfy the Nasdaq listing requirements.
"I wouldn't read too much into the price decline today," Barrington Research equity analyst John Hain wrote in an email. "As a stock that has a relatively low price per share, it is particularly susceptible to the impact of day traders. And this is likely just an instance of profit-taking by investors with very short time horizons."
S&P equity analyst Tuna Amobi calls the volatility of Sirius XM stock "just the nature of the beast ... you just have to have the stomach for its volatility to hold on to the stock. While
drop may sound like a lot -- for a one dollar stock, it doesn't really take that much to move it."
S&P currently has a 12-month price target of $1.50 for Sirius XM stock, but still recommends it as a hold, factoring in its volatility and risk-reward considerations and the company's unique capital structure. The stock, of course, is rated high-risk.
On April 14, Sirius XM announced that it added 171,441 net subscribers in the first quarter of 2010, compared to a net subscriber decline of 404,422 during the same period last year. Shares rallied that day, climbing from a Tuesday closing price of 96 cents to a Wednesday close of $1.07 -- and adding three more cents to reach $1.10, entering Friday's trading.
Thus, Amobi cautions that Friday's share price action could also just be "people trying to digest some of the gains." The net subscriber figure was much stronger than Amobi expected, and he says that he sees the company being on track to realizing its outlook.
Morningstar analyst Michael Corty, for his part, says that he expects Sirius XM to continue adding subscribers as the economy improves. In the short-term, Corty attributes the subscriber growth to the auto sector improving.
Still, Corty cautions that the longer-term threats to Sirius XM's growth are still in play. "Other possible technology could emerge over the next several years that could emerge as a substitute for satellite radio," he said. New technology and wireless capabilities within cars are among the threats that he's referring to.
Sirius XM on April 14 also said that the conversion rate from a trial subscription included in the sale of a vehicle to a self-pay subscription improved in the first quarter of 2010 to 45.2%, up from 44.6% for year-ago period.
"The continued year-over-year improvements in the conversion rate ... it essentially demonstrates that nearly half of all trial subscribers find enough value in the service to continue to maintain those subscriptions after the trial expires," Hain said.
-- Reported by Andrea Tse in New York
Follow TheStreet.com on
and become a fan on
Copyright 2010 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.