Shares of SIRIUS climbed 11 percent on Thursday after it stood by its 2006 subscriber forecast, even as its bigger rival backed off its expectations for new satellite radio users.
Sirius shares rose to a session high of $4.13 on Nasdaq after it said late on Wednesday that it still expects to have a total of 6.2 million subscribers by the end of the year.
Only a few hours earlier, XM Satellite Radio Holdings, the bigger provider of nationwide radio service for a monthly fee, trimmed its year-end outlook to 8.5 million from 9 million, citing weaker demand and the slow introduction of new products.
Sirius also said it continues to expect to generate positive free cash flow for the full year 2007.
Sirius' stock had declined on Wednesday in sympathy with XM's news, analysts said. But analysts noted that XM's woes appear to be unique to XM.
"While we interpret XM's pullback as overdone, it was self-inflicted. Sirius's pullback, however, was undeserved," said Oppenheimer & Co. analyst Thomas Egam in a client note.
Barrington Research analyst James Goss maintained his "outperform" rating on Sirius, saying the stock is "the current preferred choice for those interested in participating in this industry segment." He cut XM to "market perform" from "outperform."
XM has more than 6.5 million subscribers, and Sirius has some 4.1 million subscribers. The sector remains one of the world's fasting growing new technologies, and analysts have forecast total users may top 40 million in a few years.
But XM has been battered this year with bad news, including probes by the U.S. Federal Communications Commission and U.S. Federal Trade Commission, concerns about its relationship with beleaguered automaker General Motors Corp., and charges that it is spending too much in its quest to gain new users.
Lawsuits from major recording industry companies as well as its own shareholders have weighed on the stock.
Bear Stearns analyst Robert Peck on Thursday cut his opinion on the stock to "underperform" from "outperform," citing questions about the credibility of XM's management.
"We think the market has lost faith, and unfortunately what used to be XM's premium over Sirius, has been eroded," he said. "Sirius continues to hit expectations ... (and) we think it is difficult for the market to continue to penalize Sirius for XM's short-term travails."
XM shares were down 1 percent, or 13 cents, to $13.62 on the Nasdaq.