Sirius XM’s (NASDAQ:SIRI) stock has seen a lift in last couple of weeks, perhaps driven by positive sentiment among analysts and the holiday season. During its last earnings, the company announced that it will meet its full year net subscriber addition expectations of 1.6 million, and that requires a very optimistic subscriber gain in Q4. As the company’s subscriber additions depend on vehicle sales from companies such as Ford (NYSE:F) and GM (NYSE:GM), the investors are eying how car sales are doing in order to gauge whether the company will be able to do so. Below we present the developments that have taken place in last couple of weeks in this regard.
November Car Sales Showing Strength, Perhaps Not Enough
- Sirius XM Earnings: Subscriber Growth Accelerates And Exhibits Future Potential
- Sirius XM Earnings Preview: Steady Subscriber Adds Expected
- By How Much Have Sirius XM’s Revenue & EBITDA Increased In The Last Five Years?
- How Has Sirius XM’s Revenue Composition Changed In The Last Five Years?
- What’s Sirius XM’s Revenue & Net Income Breakdown In Terms Of Different Revenue Sources?
- What’s Sirius XM’s Fundamental Value Based On Expected 2016 Results?
According to Edmunds.com, the November U.S. vehicle sales will total around 1 million, which would be the highest seasonally adjusted annual rate of the year.  However since the target subscriber additions for Q4 2011 are much higher than what the company gained in Q3 2011, we believe these sales figures may not do it for Sirius XM. The company will need to improve its conversion rate and push even harder in used vehicle category to meet its Q4 targets.
On the product and services side, there are couple of things to note. Firstly, Sirius XM has started using the analytics software from SAS in order to better model the consumer behavior and target its marketing messages more effectively.  Secondly, the company is again offering 14-day free trial to promote its service, perhaps in an attempt to meet its subscriber guidance for Q4.
Overall we are positive on the stock as our price estimate of $2.11 reflects a premium of more than 15% to the market. Recently, a research firm Lazard Capital upgraded its price target for Sirius XM to $2.25, further echoing similar sentiment. The company will benefit from price rise next year, and if it can continue with subscriber additions, the stock should move up significantly.Notes:
- Sirius XM Radio (NASDAQ:SIRI) and Auto Sales: Edmunds Releases Official November Forecast, Satellite Radio Playground, Nov 29 2011 [↩]
- Sirius XM (NASDAQ:SIRI) Utilizes SAS Analytics, Satellite Radio Playground, Nov 30 2011 [↩]