How Will Sirius XM Perform In Second Half Of 2018 After Strong Q2 Growth?

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SiriusXM (NASDAQ: SIRI) reported its Q2 earnings on July 25. The company met earnings expectations, while beating on revenue. The company reported a solid 6% increase in revenues to just over $1.43 billion. Much of the revenue growth came from subscriber revenue, as a result of nearly half a million new self-pay subscriber additions. Subscriber revenue was up nearly 3% year-on-year to over $1.1 billion, forming nearly 80% of the company’s net revenues. SiriusXM reported a massive 50% jump in its adjusted earnings to 6 cents, as a result of lower tax rate. Further, the management raised its full year subscriber guidance based on strong performance in first half of 2018. We believe sustained penetration in both the new and used car markets should drive the company’s full year results. Below, we provide a brief overview of the company’s results and what lies ahead.

 

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We have summarized our expectations for the company’s 2018 results on our interactive SiriusXM’s full year results dashboardYou can modify the key drivers to arrive at your own price estimate for the company.

Robust Subscriber Growth To Drive Second Half Results

Subscriber revenue contributes nearly 80% of Sirius’s overall revenue, and revenue stream has seen consistent growth. Subscriber revenue growth was primarily driven by a better than anticipated increase in the daily weighted average number of subscribers and ARPU. The company reported it added nearly half a million new self-pay subscribers in Q2’18. Further, the upgraded subscriber guidance indicates the company is moving in the right direction as it continues to gain traction. SiriusXM’s offerings of differentiated content, coupled with the robust growth of streaming services and its partnership with Netflix, should boost its subscriber base. In addition, the company is also experimenting with the launch of video services, which should further boost its subscriber base and provides a significant long-term growth opportunity.

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

Strong new car sales in May and June sparked a stronger-than-expected Q2’18, which helped SiriusXM’s penetration in the new and used car market. The company steadily increased its penetration in the new car market and reported it to be around 75%, while used car penetration stood at 38%. Further, the renewals of multi-year OEM deals, coupled with roll out of its 360L product – which combines satellite radio with a streaming experience, should help SiriusXM increase its penetration in the new car space. In addition, SiriusXM has been concentrating on increasing its penetration rate in the used car market as well.

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