Sirius XM Radio Inc posted its first quarterly profit since its merger and said it expects to add 500,000 new subscribers in 2010 as the recovery in the car market boosts demand for satellite radio.

The results suggest that the company, run by media industry veteran Mel Karmazin, has solidified and is set to grow. Just a year ago, it flirted with bankruptcy as it faced a hefty debt load and weak auto sales.

"This is very encouraging, especially the guidance," said Wunderlich Securities analyst Matthew Harrigan. "They are very sensitive to the automotive industry, but certainly the confidence that they can add 500,000 customers is a good thing."

Sirius shares, which have risen more than 20-fold from a year ago when it traded as low as 5 cents a share, were down 3 cents, or 2.73%, at $1.07 on Thursday (Feb. 25) afternoon. Analysts and investors are re-evaluating shares of Sirius, whose market capitalization is now about $4.2 billion.

"The liquidity crisis is over, the business is stabilizing, accelerating -- you have a company that has a viable business," said RBC Capital Markets analyst David Bank. "The next question is, what is an appropriate valuation for the company."

Standard & Poor's analyst Tuna Amobi raised his price target on Thursday to $1.50 from $1, citing the absence of a "near-term financing overhang."

Born of the 2008 merger that united rivals Sirius Satellite Radio and XM Satellite Radio, Sirius XM has been resurgent after receiving a life-saving loan in February 2009 from Liberty Media. The transaction bought Liberty head John Malone a 40% equity stake in Sirius XM.

Since then, the company has seen a rise in average revenue per user, lower costs to woo subscribers to the service and an increase in new-car buyers who sign up for satellite radio after their trial subscriptions lapse.

Most important, sales of news cars, the biggest source of Sirius' customers, are looking up.

"With auto sales showing signs of recovery, we are well positioned to hopefully grow our promotional base in 2010 and beyond," Karmazin said on a conference call with analysts.

The company posted fourth-quarter net income of $14.2 million, or nil per share, compared with a year-earlier net loss of $245.8 million, or 8 cents a share.
Analysts had expected a loss of 2 cents a share, according to Thomson Reuters I/B/E/S.

The company attributed its profit to subscriber gains and cost-cutting.
Revenue at Sirius XM, whose on-air personalities include Oprah Winfrey, Howard Stern and Martha Stewart, rose 6% to $684 million, beating the analysts' forecast of $664 million.

As it had previously reported, Sirius added 257,000 subscribers in the fourth quarter and ended the year with 18.8 million.

Sirius XM said it expects revenue to grow about 7%to $2.7 billion in 2010. The outlook was just shy of the analysts' average estimate of $2.8 billion.

The company noted that subscriber acquisition costs could increase in 2010 because of the automotive sector recovery, but said those expenses would yield higher revenue and cash flow benefits in 2011.