Sirius XM (NASDAQ:SIRI) recently reported that it had a record quarter in terms of net subscriber additions. The satellite radio service provider added about 540,000 net subscribers in Q4 of 2011, taking its total to about 21.9 million subscribers by end of 2011. [1] This implies that the company added about 1.7 million subscribers for 2011, registering growth of close to 20% over 2010 in terms of net subscriber additions. The company added about 1.4 million subscribers in 2010.
Unlike our previous expectations, it appears that the pick up in auto sales in December, along with increased penetration, both in new and used vehicles, led to this phenomenal growth (See article December Auto Sales Up, Good News For Sirius XM?) Sirius XM’s success is primarily hinged around its partnerships with automotive companies such as GM (NYSE:GM), Ford (NYSE:F) etc. Success with these partnerships determines the growth in automotive subscribers, which is the main driver of Sirius XM’s stock.
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As a result of higher than expected subscriber gains, we have revised our price estimate for Sirius XM to $2.18.
We estimate that at the end of 2011, Sirius XM had around 15.5 million automotive subscribers, taking the total to 21.9 million subscribers. The results provide solid proof for Sirius XM’s robust business model and how it benefits from its business partnerships with car dealers and manufacturers. The release of subscriber data has given a boost to the stock in the last week.
Our price estimate for Sirius XM stands at about $2.18, implying a premium of more than 5% to the market price.
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Notes:- SiriusXM Adds Approximately 1,700,000 Net Subscribers in 2011, Sirius XM Press Release, Jan 4 2011 [↩]
