TheStreet

Too Dicey to Hold

Richard Suttmeier

02/21/06 - 08:13 AM EST
After you receive this alert, I will remove XM Satellite Radio (XMSR:Nadaq) from the model portfolio. Shares closed at $21.57 Friday.

With this newsletter coming to an end next week, I will not be following XM on a daily basis but only in an occasional column on RealMoney.

XM reported disappointing earnings last Thursday, and Sirius Satellite Radio (SIRI:Nasdaq) did the same on Friday. But both stocks slumped on their reports.

I had indicated in my trading strategies that I would consider adding to the position in XM on weakness to its 200-week simple moving average at $20.80, but this morning XM has been downgraded to sell from hold, according to ValuEngine. If I sell this position near Friday's close at $21.57, the loss will be 18.3%. (Keep in mind that the model portfolio gained 42.8% on a previous holding in Sirius.) However, even before last week's earnings report, Sirius had been rated a sell, according to ValuEngine.

XM and Sirius must get serious about turning a profit, and stopping the star and price wars. The products are up and running with a full slate of diversified content, and both have ample automobile alliances and numerous consumer products sold at retailers such as Best Buy and Circuit City. In my judgment, there is room for both companies in the satellite radio space, but there are alternative ways to listen to music and talk in the car and at home. Satellite radio is no longer a hot topic and emerging technology.