XM Satellite Radio
posted a steep third-quarter loss Thursday, but the satellite radio broadcaster's shares rose in early action as investors continue to embrace its high-risk growth story.
Part of the hoopla was over the surprising 47% sequential sales surge and lowered costs per subscriber acquisition. For the third quarter ended Sept. 30, Washington, D.C.-based XM posted a loss of $133 million, or $1.12 a share, against a year-ago loss of $110 million, or $1.26 a share. Revenue jumped to $26.9 million from just $5.6 million a year earlier and $18.3 million in the second quarter.
The company added 237,395 users during the quarter, posting 34% sequential growth.
The average cost of adding each new subscriber fell to $129 from $385 a year ago. That beat most analysts' expectations, which had the cost falling to about $150 per new user.
XM also said it would beat the 2.5 million-subscriber target analysts have set for next year. XM passed 1 million subscribers last month.
XM charges users around $10 a month for 100 channels of radio. Like rival
, XM has signed partnerships with many of the big automakers. That has satellite radio bulls saying it's only a matter of time until the product becomes a mass-market standard.
Still, the companies are burning cash at a rapid rate and liquidity remains a potential concern down the road. For now, though, XM and Sirius have seen their shares rise strongly over the last year amid the market's general tech euphoria.
On Thursday morning, XM rose 64 cents to $21.86.