What To Expect From Sirius XM’s Q4 Earnings

by Trefis Team
Sirius XM Radio
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SiriusXM (NASDAQ: SIRI) has had a decent year so far. With three quarters reported, the company’s revenue growth year to date has been just over 6%, and we expect the revenue trend to continue when the company reports its fourth quarter earnings on January 30. We believe its growth will be mainly driven by solid growth in its subscriber base, owing to its robust content lineup and expanded reach as a result of the PayTollo acquisition, Amazon Echo deal, and multi-year OEM deals. Additionally, the Pandora acquisition, which is expected to close in the first half of FY 2019, should not only expand Sirius’ presence in the streaming market, but also accelerate Pandora’s distribution to vehicles and unlock music streaming services for automobiles. As a result, this deal holds great long term potential for both companies. Below, we take a look at what to expect from SIRI in Q4.

Our price estimate for Sirius XM’s stock stands at $6, which is now higher than the market price. We have also created an interactive dashboard which outlines what to expect from SiriusXM’s full-year results. You can modify the key value drivers to see how they impact the company’s revenues and bottom line. Below we discuss some of the key factors that are likely to impact SIRI’s earnings.

Subscriber Growth To Drive Top Line

Subscriber revenue contributes nearly 80% of Sirius’s overall revenue, and the revenue stream has seen consistent growth. As a result, the company has been witnessing healthy growth in its subscribers largely due to its immense content and improved service reach. The company recently provided an update on its strong performance in 2018 with respect to self-pay subscriber additions. Sirius announced that it added nearly 1.4 million self-pay subscribers in 2018, beating its upgraded guidance by approximately 1.3 million. Additionally, its offerings of differentiated content, coupled with the robust growth of streaming services and its partnership with Netflix, its marketing partnership with Amazon Echo, and the launch of its new college sports channel, 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

SiriusXM’s connected service has seen consistent growth in the first nine months of 2018, driven by stronger than expected new car sales. As of Q3’18, the company steadily increased its penetration in the new car market, reporting it to be around 80%, while used car penetration stood at 40%. We expect another quarter of solid penetration rate as a result of improved new car sales in the auto industry. Further, the renewals of multi-year OEM deals, coupled with the PayTollo acquisition by Automatic – a Sirius XM subsidiary – should not only help SiriusXM enhance its connected vehicle capability, but also increase its penetration in the new car space.

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