Will Sirius XM Disappoint 2016?

2015 proved to be a decent year for Sirius XM (SIRI), as company added 525,000 new overall subscribers in the third quarter, up 21 percent from 433,000 overall new subscribers compared to same period of 2014. In Q3FY15, the company shared earnings per share of $0.03, in-line with the consensus estimate of $0.03. Revenue for the quarter came in at $1.17 billion compared to analyst estimate of $1.15 billion. The company’s third quarter adjusted EBIDTA also surged 17 percent to a new record. Can the company sustain its performance in 2016? Let's take a look.

Nowadays, it is very easy to integrate satellite radio in receiver-less car.
Therefore, Sirius XM recently launched its first media product to feature a touch screen controller based on commander touch. The controller is very thin, and can be easily attached on a vehicle’s dashboard. The tuner model can be placed away behind the dashboard.

One of the most important things is that there’s no need of eliminating the vehicle’s existing receiver. Drivers can easily use Commander Touch with the help of FM or auxiliary audio input buttons, and can also take benefit of the company’s increasing number of features.

Mostly all the new cars roll out with factory installed Sirius or XM receivers. Around 75 percent of the cars sold these days has satellite radio, but that still leave a quarter of the market that comprises of cars that does not come with Sirius or XM choice are likely value priced vehicles where drivers are not as much likely to pay for monthly premium radio subscriptions.

Lastly, Sirius XM Commander Touch is incremental. It account for the efficient way for the legal satellite radio monopoly to attract subscribers. The all new Commander Touch is available in the market for around $129.99, and with an ongoing promotion it also offers three months of the company’s costliest subscription plan at no extra charges. New cars and factory-installed receivers will carry on to be the chief sources for subscriber growth at Sirius XM. If this innovative product manages to get a healthy number of customers; it will permit the company to extract more profit from the car market.

Moreover, according to recent estimates, the average age of cars in the U.S. is over 10 years. This means that car sales can soar in the near future as many people will likely replace their cars. It will take years to replace the existing fleet of vehicles in the U.S. and although car sales are at record levels, I think the strong sales surge will continue.


Sirius XM is nicely positioned to benefit from the growth in car sales. The company’s new products along with the expected growth in car sales are massive tailwinds for Sirius XM. Hence, I think the investors can still bet on Sirius XM going forward.
Published on Feb 2, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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