Sirius XM Radio forecast lower subscriber growth than some analysts had expected, saying customer losses from last month's price increase would slightly offset the benefits of increasing U.S. auto sales.
The satellite radio operator, which gets the vast majority of its subscribers through new U.S. car sales, said it would add 1.3 million in 2012.
"This is really conservative guidance, given they added 1.7 million subscribers last year and auto sales are forecast to increase by 8 percent this year," said analyst Brett Harriss of Gabelli & Co, which owns Sirius stock.
"They want to make sure they beat guidance," he added.
Harriss expects Sirius to add some 1.65 million subscribers in 2012. Analysts at Miller Tabak had forecast the addition of 1.45 million subscribers.
Sirius implemented its first-ever subscriber price increases last month and said it had seen a slight uptick in the rate of customer losses.
The company raised its forecast for 2012 adjusted earnings before interest, taxes, depreciation and amortization to $875 million from $860 million. It said it still expected free cash flow of $700 million on revenue of $3.3 billion for the year.
Chief Financial Officer David Frear said on a conference call that the company and its board would consider returning cash to shareholders this year either through a share buybacks or a dividend payout.
Sirius reported a fourth-quarter profit in line with expectations, as net subscriber additions jumped 65 percent to 542,966, but revenue came in slightly below Wall Street estimates.
The New York-based company, which has radios on the dashboards of 67 percent of new cars in the United States, reported net income of $71 million, or 1 cent a share, compared with a year-earlier net loss of $81 million, or 2 cents a share.
Sirius shares were down 1.4 percent at $2.16 in morning Nasdaq trading.
"Given that the stock is not cheap, trading at mid-teen multiple teens on an operating cash flow basis, I'm not surprised the stock is down slightly on any kind of hint of negative news," said Wunderlich Securities analyst Matthew Harrigan.
The company, which competes with free Internet radio services such as Pandora Media Inc, reported revenue of $784 million, against estimates of $785.5 million, according to Thomson Reuters I/B/E/S.
Chief Executive Officer Mel Karmazin said on a conference call that Sirius would introduce a Web-based on-demand and personalized radio services this year at no additional cost to its subscribers.
(Yinka Adegoke in New York and Sayantani Ghosh in Bangalore; Editing by Joyjeet Das)