Sirius XM’s Outlook Lifted By Stronger Economy And Vehicle Sales Data
Sirius XM (NASDAQ:SIRI) is sitting pretty as vehicle sales are looking good, and the U.S. economy seems to be improving with rising employment, stocks rallying and credit availability becoming easier. [1] Compared to about 12.8 million last year, new vehicle sales in the U.S. are expected to go past 14 million in 2012. [2] Sales of Chrysler and Volkswagen increased by 30% in the period of March 2012 compared to the last year. This bodes well for Sirius XM (NASDAQ:SIRI) which has expanded significantly in past few years by utilizing new and pre-owned vehicle sales from companies such as Ford (NYSE:F), GM (NYSE:GM) and Toyota.
See our complete analysis for Sirius XM
[trefis_forecast ticker=”SIRI” driver=”1354″]
Sirius XM depends significantly on its automotive subscriber base.
The company’s equipment is typically installed in 67% of the new vehicles out of which 44% to 46% customers continue with Sirius XM’s service after the trial period expires. [3] Given these figures and expected vehicle sales in the U.S., Sirius XM can gain roughly 4 million paying gross subscribers in 2012. Given the past monthly self-pay churn, we think that Sirius XM can easily surpass its own subscriber guidance. This higher gain is priced into our price estimate.
Our price estimate for Sirius XM stands at $2.26, implying a discount of less than 5% the current market price.
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Notes:- U.S. Economy Enters Sweet Spot as China Slows, Bloomberg, Apr 3 2012 [↩]
- U.S. Car Sales Keep Up Their Firm Growth, The New York Times, Apr 3 2012 [↩]
- Sirius XM’s Q4 2011 Earnings Transcript [↩]