What To Expect From Sirius XM In 2018

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Despite the slowdown in new car sales, we expect SiriusXM (NASDAQ: SIRI) to post mid-single-digit revenue growth in 2018, primarily driven by its increased penetration in the new car and used car market. Net revenues for 2017 grew to $5.4 billion (+8% year-on-year), driven by growth in subscribers and average revenue per user (ARPU). We have created an interactive dashboard on how we expect 2018 to shape up for SiriusXM. You can adjust forecasts and other estimates to see how changes would impact the company’s earnings. We forecast the company’s earnings to be around 19 cents per share in 2018.

 

Better Than Expected Subscriber Growth Propels Top Line

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Subscriber revenue contributes nearly 82% of Sirius’s overall revenue, and revenue stream has seen consistent growth. Subscriber revenue grew nearly 7% y-o-y to $4.5 billion in 2017, primarily driven by a better than anticipated increase in the daily weighted average number of subscribers and ARPU.

The company remains optimistic about 2018, driven by the growth of its subscriber base and an increase in subscription rates. Further, the company expects to add nearly 1 million self-pay subscribers in 2018. However, given the ease with which SiriusXM exceeded its earlier 2017 targets, we expect the company to manage to beat its 2018 estimates, as long as the auto market and economy remain relatively steady.

SiriusXM Continues To Grow Steadily In The New And Used Car Market

The slowdown in the auto industry softened new car sales in 2017, but this hasn’t affected Sirius’ penetration in the new car and used car market. Despite the slowdown, SiriusXM steadily increased its penetration in the new car market and reported this to be around 77%, while the used car penetration stood at 35%. The continued growth in market penetration will help the company to overcome the slowdown in new car sales. In addition, SiriusXM has been concentrating on increasing its penetration rate in the used car market as well.

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