Sirius XM Will Keep Getting Better

Sirius XM (SIRI) ended 2015 positively and the company is off to a decent start this year as well. In the most recent quarter, Sirius XM shared revenue of $1.24 billion, surpassing the estimates by $20 million. However, the company reported earnings per share of $0.03, $0.01 less than the estimates.

Sirius XM performed well in this quarter as its revenue surged 10 percent and it also raised full year projections. On the other hand, the company’s net income increased 68 percent along with adjusted EBIDTA of $468 million. Apart from this, Sirius XM’s new subscriber base escalated by 587,000, totaling to 30.6 million subscribers.

In the case of Sirius XM, new-car sales have been a primary growth driver of the company’s subscription growth for years, as its technical products are used by automakers in their cars from many years.
However, it seems like new car subscription growth has just reached its saturation point and Sirius XM will have to look at other places to propel growth.

At present stage, Sirius XM’s products are installed in a majority of cars as well as trucks that are currently in the market and much of that final 25 percent is made up of cars valued at the low-end of automakers’ particular line-ups. Therefore, to overcome this problem, Sirius XM has shifted its attention towards the used cars market.

Sirius XM did so because the company observed that numerous used car owners want to use its products. A lot more used cars with the company’s technology formerly installed are considerably changing conditions, and Sirius XM now perceives this area to be its chief driver of growth moving forward.

Apart from this, the company made a massive purchase, the biggest since the merger of Sirius and XM in 2008. The company paid $530 million for Agero, providing it some skin in the auto-related telematics market. Furthermore, there are some rumors regarding Sirius XM and Pandora Media forming some kind of partnership. If the deal gets executed successfully, it will give a birth to monster of next-gen platforms.


Although Sirius XM’s primary target market has reached a saturation point, the company has done well to gain traction from other segments of the market. The company should continue seeing its subscription count grow on the back of the used car market. Going forward, investors can expect Sirius XM to be aggressive when it comes to growth, thereby making the stock a buy.
Published on Aug 8, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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