Sirius XM Gains Stability: Analyst

Morgan Stanley initiates coverage on Sirius XM -- but without issuing a rating on the company's stock.
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Sirius XM Radio

(SIRI) - Get Report

is emerging as a more stable company, though its stock price will continue to be volatile, according to one analyst.

David Gober of

Morgan Stanley

(MS) - Get Report

initiated coverage on the company Friday without putting a rating or price target on the stock. "After completing the Sirius/XM merger, a refinancing of its balance sheet and weathering the recent recession, Sirius XM has emerged as a more stable company with several key opportunities," he wrote in a note.

Should automobile sales continue to accelerate, Sirius is poised to grow its subscriber base, since its satellite-radio service is primarily distributed through automakers. Potential also exists in used vehicle sales, as Sirius estimates there are about eight million cars in the U.S. with satellite radios that are not currently in service.

"As cars are re-sold, Sirius has an opportunity to gain subscribers with relatively low acquisition costs," Gober wrote.

Sirius' recent offering of its Internet radio services on mobile devices could also help its growth.

Still, Gober wrote, "Equity values will remain highly volatile due to relatively high leverage and still relatively small free cash flow."

Sirius' stock was trading higher by a penny late in Friday's session, changing hands at $1.02 on lower-than-average volume.

-Reported by Jeanine Poggi in New York.

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