Sirius XM (SIRI) Ups Subscriber View, Banks on Auto Sales
On Sep 17, 2014, we issued an updated research report on Sirius XM Holdings Inc. (SIRI). The company reported mixed financial results for the second quarter of 2014, with its bottom line on par with the Zacks Consensus Estimate and the top line ahead of the same.
Second-quarter net earnings per share of 2 cents were in line with the Zacks Consensus Estimate. Meanwhile, quarterly total revenue of $1,035.3 million exhibited annualized growth of 9.2% and also outpaced the Zacks Consensus Estimate of $1,013 million.
As on Jun 30, 2014, SIRIUS XM’s total subscriber base stood at 26,301,581, up 5% year over year. In the reported quarter, ARPU came in at $12.36 compared with $12.28 in the year-ago quarter. ARPU is expected to rise further in 2014 as the company plans to raise its core service rates by 50 cents. Average self-pay monthly churn rate was 1.8% against 1.7% in the prior-year quarter.
Recently, the company raised its 2014 subscriber guidance buoyed by domestic new vehicle sales that touched a record high in August this year, ever since Jan 2006. Sirius XM now expects net subscriber addition of nearly 1.45 million in 2014, up from its prior guidance of roughly 1.25 million. Robust auto sales numbers are a real boost for Sirius XM as the company is largely dependent on the trends within the auto industry. In the second quarter of 2014, the company had 71% penetration rate for new car sales against 69% in the prior-year quarter.
In addition, Sirius XM signed strategic deals with Ford Motor Co. (F) and Chrysler Group on Jun 19 and 25, respectively. Per the deals, the company will provide Ford and Chrysler's customers with a complimentary five-year subscription to its navigation packages, SiriusXM Traffic and SiriusXM Travel Link.
On the flip side, SIRIUS XM is largely dependent on the future of the U.S. auto industry, which at present is poised for strong growth. Therefore, even a minor fluctuation in auto sales may significantly affect the company’s financials. Moreover, a highly leveraged balance sheet coupled with stiff competition from other Internet music service providers will continue to act as headwinds for the company going forward.
SIRIUS XM currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Stocks that warrant a look in this Industry are Baidu, Inc. (BIDU) and Saga Communications Inc. (SGA). Baidu sports a Zacks Rank #1 (Strong Buy), whereas Saga Communications holds a Zacks Rank #2 (Buy).
Read the Full Research Report on F
Read the Full Research Report on BIDU
Read the Full Research Report on SIRI
Read the Full Research Report on SGA
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