Sirius XM 2.0 Around the Corner Though Unlikely to Drive Stock
Source: Trefis Estimates, Sirius XM's Official Website
Sirius XM’s (NASDAQ:SIRI) next version of service 2.0 is just around the corner. [1] While this is a positive and anticipated development, is it enough to move the stock? Given recent economic events and Greece’s likely default, the macro environment may still continue to keep the stock suppressed in the near term. However, longer term we see upside from its organic growth and from its ties with major automobile makers such as Ford (NYSE:F), GM (NYSE:GM) and Toyota (NYSE:TM), which help drive its presence in the U.S. automobile space.
Our price estimate for Sirius XM’s stock stands at $2, implying a premium of roughly 25% to market price.
What 2.0 Offers & Potential Impact
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Sirius 2.0 will offer additional 30 channels of programming transmitted via XM’s satellites along with replay and time shift functions. [1] However the issue is that the service may not be readily available to vehicles installed with Sirius tuners. The company expects automakers to offer tuners that will allow the 2.0 version and so it will take some time before the service is accessible to the broader user base.
At the moment the pricing is not clear however we expect the average revenue per user to increase slightly over the course of next year. Nevertheless these positive forces may be clouded by global economic factors.
Meanwhile Stock May Remain Suppressed Due To Macro Factors
Sirius’ growth depends on the health of the automotive market as well as general consumer sentiment. With the possibility of a Greek default, the ripples can be felt in the U.S. economy which is dealing with its own debt crisis. In such a situation, the industries are uncertain and consumer spending could remain slow. This can affect automotive sales as well as consumer willingness to spend on Sirius XM’s service. If the situation continues or get worse, Sirius XM could feel pressure on its user base growth as well as revenues.
See our complete analysis for Sirius XM’s stock.
Notes:
- SiriusXM Readies 2.0 Launch, twice.com, Sept 12 2011 [↩] [↩]