With light vehicle sales in the U.S. jumping in January, the satellite radio service provider Sirius XM (NASDAQ:SIRI) may perhaps anticipate another good year. While it’s too early to say, the continued growth in automotive sales in the U.S. could boost the company’s stock in 2012. Sirius XM’s growth is primarily hinged on sales of new vehicles from companies such as GM (NYSE:GM) and Ford (NYSE:F), although the channel of pre-owned vehicles is becoming increasingly important. Light vehicles sales are estimated to have grown by 6% in January 2012 compared to same period a year ago. [1]
Our price estimate for Sirius XM stands at $2.18, implying a premium of about 5% to the current market price.
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Furthermore, Chrysler dealers have announced that they will be providing a 3-month Sirius XM subscription to buyers of pre-owned vehicles, [2] regardless of the vehicle manufacturer.
If vehicle sales continue to see such surge for remaining part of the year and Sirius XM continues to push hard for used-vehicles channel, our subscriber gain expectation for the year could turn out to be a bit conservative. In other words, there could be further upside of 5% to 10% to our price estimate as a result of higher-than-expected gain in automotive subscribers. You can modify our forecast above to see how increased automotive subscriber additions can lift Sirius XM’s stock.
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Notes:- U.S. Auto Sales Seen Surging 6% in January, Bloomberg, Jan 31 2012 [↩]
- Chrysler Dealers Provide 3-Month SiriusXM Subscription on Pre-Owned Vehicles, CBS Detroit, Jan 23 2012 [↩]
