What To Expect From Sirius XM’s Q3 Earnings

by Trefis Team
Sirius XM Radio
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SiriusXM (NASDAQ: SIRI) is scheduled to announce its fiscal third quarter results on Wednesday, October 24. Consensus market estimates call for the company to report revenue of $1.46 billion and adjusted EPS of 6 cents. We expect SiriusXM to report another quarter of revenue growth driven by solid growth in its subscriber base, driven by robust new and used car conversion rates and improved penetration in the new car and used car space. Further, its multi-year OEM deals, coupled with the PayTollo acquisition and Amazon Echo deal, should further boost its subscriber base. Additionally, the acquisition of Pandora, which is expected to close in the first half of FY 2019, would give the satellite radio company a greater presence in the streaming market. Moreover, Pandora’s technological competence should help SiriusXM expand beyond vehicles and streamline its features like personalized recommendations. Concurrently, SiriusXM’s alliance with several automakers should accelerate Pandora’s distribution to vehicles and unlock music streaming services for automobiles. This deal holds great long term potential for both companies. We have created an interactive dashboard that illustrates our expectations for the company’s second quarter. You can modify the average revenue per user (ARPU), Daily Weighted Average Subscribers, and other forecasts to see how changes would impact the company’s results.

Subscriber Growth To Drive Top Line

Subscriber revenue contributes nearly 82% of Sirius’s overall revenue, and this revenue grew 3% in the first half of 2018, primarily driven by an increase in the daily weighted average number of subscribers and ARPU. SiriusXM’s robust net subscriber growth is expected to drive the company’s Q3 revenues. SiriusXM’s offering of differentiated content, coupled with the strong growth of streaming services, should boost its subscriber base. Further, 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. In addition, we expect the launch of its new college sports channel to provide a decent near-term growth opportunity. Additionally,  its marketing partnership with Amazon Echo should further drive its subscriber base. We will be interested to hear if the company’s management boosts its full year outlook.

SiriusXM Grows Steadily In The New And Used Car Market

Strong new car sales in the auto industry sparked stronger-than-expected new car sales in the first half of 2018, which helped Sirius’ penetration in the new and used car market. SiriusXM steadily increased its penetration in the new car market, reporting it to be around 75%, while used car penetration stood at 38%. However, a slowdown in the auto industry should dampen its penetration rate. Nevertheless, the renewals of multi-year OEM deals, coupled with the acquisition of PayTollo by Automatic – a Sirius XM subsidiary – should help SiriusXM enhance its connected vehicle capability and increase its penetration in the new car space.

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