SiriusXM Q2’17 Earnings: Used Car Market And Connected Vehicles Hold The Key To SiriusXM’s Growth

by Trefis Team
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Sirius XM Radio
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SiriusXM (NASDAQ:SIRI) reported its Q2’17 earnings on July 27th. The quarterly revenues of the company grew by 9% reaching an all-time high of $1.3 billion. SiriusXM reported an addition of 4,45,000 net new subscribers, therefore overcoming the concern of investors regarding a slowdown in subscriber growth, which surfaced after bleak subscriber growth in Q1.

Similarly, the company reported an all-time high EBITDA of $522 million which was led by impressive record high ARPU (average revenue per user) of $13.22.

Going forward, we believe the following factors will continue to be the primary growth drivers for SiriusXM:

  1. Expanding penetration in the used car market
  2. Diversification in the form of new technology and mobile apps

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Used Car Market – A Huge Potential Market For SiriusXM

SiriusXM has steadily increased its penetration in the new car market to 76% in the recently concluded quarter. This has enabled SiriusXM to overcome the brunt of slowdown in new car sales.

In addition, recently SiriusXM has been concentrating on increasing its penetration rate in the used car market as well, where its penetration rate sits at around mid 30 percent. The subscriber additions from the used cars grew by 14% in Q2, and the company believes that in FY’17, the volume of used cars sold with SiriusXM will exceed the ones in the new cars.

According to CNBC, 40 million used cars were sold in the US in 2016. This number may grow further in the upcoming years as this market is becoming more formalized with the entry of large players. SiriusXM aims to achieve a penetration rate of over 70% in the used car market as well. If it successfully achieves that, then this can turn out to be a major growth driver for SiriusXM in the upcoming financial years.

SiriusXM Is In Coherence With The Changing Technology

  • In an attempt to stay on board with the latest technology, SiriusXM has integrated with Alexa, which gives a new scope to the connected vehicles approach that the company wants to exploit in the near future.
  • SiriusXM’s availability in 128 million connected devices including smart TV’s, gaming stations, and its plans to launch on platforms like AppleTV, AndroidTV and Chromecast can boost its presence and revenue generation in the upcoming years as these platforms combined have millions of users around the world who have not been exposed to SiriusXM.
  • Along with bringing in the new content for the users, SiriusXM is all set to stream its in house video content for its mobile app users, making it another new player in the video streaming business after Facebook and Twitter.
  • The company has also invested $480 million in Pandora, signaling its interest in internet radio and on-demand music, making SiriusXM’s business well diversified to take advantage of a boom in any of the mentioned markets.

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