Updated from 10:10 a.m. Shares in XM Satellite Radio ( XMSR) surged 6% Thursday after earlier hitting a three-year low. The reversal came after the struggling satellite radio company cut its subscriber growth forecast for the second time this year. XM shares opened sharply lower, down 7% at $9.63, but they then recovered to trade up 64 cents at $11. The Washington, D.C., pay radio shop says it now has more than 7 million users. But citing increased competition and radio troubles, XM cut its year-end subscriber target to about 8 million. XM started the year with a goal of hitting the 9 million user mark. But in May, as rival Sirius ( SIRI) started to gain market share, the company cut its year-end estimate to 8.5 million users. Though it now is counting on signing up a million fewer paying customers by year-end, XM says it still expects to turn cash-flow positive in 2006. But the company admits that may not be easy. Reaching cash flow positive "becomes challenging toward the lower end of the subscriber range," the company said in a press release Thursday. For the second quarter, XM posted a net loss of $229 million, or 87 cents a share, on sales of $228 million. Those numbers compare with a net loss of $147 million, or 70 cents a share, on revenue of $125 million in the year-ago quarter. Excluding $105 million in special charges and debt payback, XM's second quarter pro forma loss was $46 million. That number compares with a $88 million adjusted loss in the year-ago quarter. XM's costs to acquire customers grew from year-ago levels. The subscriber acquisition cost, or SAC, in the second quarter was $64 per acquired subscriber, compared with $50 a year ago. And the cost per gross addition, or CPGA, was $112 in the second quarter, higher than the $98 level a year ago. The customer defection rate also increased at XM in the second quarter. The termination or monthly churn rate in the second quarter was 1.8%, compared with 1.4% in the year-ago period.