Sirius XM Earnings Preview: New Subscriptions And Deeper Penetration In The Car’s Market To Drive The Growth

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World’s leading satellite radio provider SiriusXM (NASDAQ:SIRI) will release its Q4’16 and full year earnings on February 2nd. Sirius XM’s top line grew by 10% in the first nine months of 2016. Also, it had exceeded its Q3 guidance by posting a 10% rise in EBITDA along with a 9% growth in its revenues. This was led by a rise in the number of cars sold in the quarter backed up by an increased penetration in the new car market.  Apart from that, SiriusXM is focusing on deepening its penetration in the used car market, which offers the untapped potential for satellite radio setups.

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In Q4, the company is likely to continue with the past performance due to the below mentioned factors:

  • In Q3, the company had increased its revenue and EBITDA guidance for the second consecutive quarter.
  • Similar to Q3, the new car sales in Q4 have gone up, and this can again lead to a surprise in the number of new subscriptions as the company’s sales are dependent on the new car sales.
  • In the previous earnings call, the company expected its technology to be present in 43% of the new cars sold in the U.S. in 2016. This is 9% higher than the penetration rate it had in 2013.
  • The company is making investments to reach the same penetration rate in the used car market as well, the benefits of which were seen in the top line growth over the past few quarters. This likely continued in Q4 and wil cotniue in the coming quarters as well.
  • Sirius XM has renewed its contracts with Toyota, Ford and Fiat Chrysler to the periods beyond 2020, which is signalling the confidence of car manufacturers in Sirius XM’s technology.