BofA Sees Static for Satellite Radio

Analyst Jonathan A. Jacoby is betting that shates of XM and Sirius will soon take a breather

Satellite radio companies will have a tougher time making sales to consumers in the coming months, Bank of America analyst Jonathan A. Jacoby warned on Nov. 27.

Retail customers had been driving XM Satellite Radio (XMSR)'s and Sirius Satellite Radio, Inc.'s (SIRI) subscriber growth. But now manufacturing customers will play an increasingly important role, Jacoby says.

"Recent channel checks with our buying sources continue to indicate a much weaker sales environment than last year for satellite radio," Jacoby said in a research note.

The analyst forecasts that the industry's retail subscribers will decline by 20% this year compared to the prior one. During the fourth quarter, Jacoby expects XM to have 30% fewer subscribers year over year and the market-leading Sirius' to drop by 10%.

XM's stock price sank 6.4% to $14.29 per share in early afternoon trading on the Nasdaq. Sirius' fell 3.7% to $4.10 per share.

The stocks may be "in for a breather," Jacoby said. The analyst kept a neutral opinion on Sirius and a buy on XM. (Bank of America has sought or received compensation for doing business with the two companies in recent months.)