Sirius XM’s 60% Penetration Rate Outpaces Weak Auto Sales
Investors in satellite radio are well aware of the importance of new car sales to the growth of the subscriber base. With weak auto sales reported for February 2010, some may think the outlook for satellite radio is dimming. The fact of the matter is that the company is maintaining or above the pace of last year, and still in line with their guidance.
The reason less worry is warranted is because the company is now being installed in 60% of all new cars manufactured. Last year at this time the penetration rate was barely over 50%. On top of this, Sirius XM is being smarter about which cars it is being installed in. In the midst of the gain in penetration, Sirius XM has improved the take rate. The number of customers electing to become self paying subscribers is growing.
Yes, Sirius XM could use the boost provided by much higher car sales, but the key take-away for the short term is that they based guidance on annualized auto sales of 10,000,000 units and currently the auto sector is on or above that pace. It is the auto sector that will deliver the 500,000 net subscriber gain Sirius XM guided to in their last call.

Sirius XM Radio is only two market closes above $1.00 away from gaining NASDAQ compliance to remain listed on the exchange. After a tough Friday, the company closed above the one dollar threshold to bring the above $1.00 streak to 8 consecutive closes. For most people, Friday was the hurdle that would prove most difficult, but instead, it looks like today is the toughest day yet.
Sirius XM Radio conducted their Q4 2009 conference call prior to market opening, and all things considered the company demonstrated a stability that has not been shown before. The company reported a small per share gain, but there was not quite enough to report a penny to the positive. Despite this, the company beat wall street expectations, which in some cases were calling for the company to report a small loss.
If you follow Sirius XM, you are likely well aware that the company pre-announced some Q4 metrics back in January. They announced the addition of about 247,000 subscribers, a churn rate of 1.97%, an OEM take rate of 46.4%, and the fact that they anticipate that the end of 2009 will have seen the company over $100 million in free cash flow. These are all positive numbers, and this news is already baked into the stock.
With Sirius XM still trading above $1.00, the threat of a reverse split begins to diminish. The company must trade above $1.00 for ten consecutive trading days to regain compliance with NASDAQ listing requirements. Three days are already in the books, and the fourth seems a near certainty with the trading day half over.
Today Sirius XM announced that it ended the year with 18,772,758 total subscribers, adding 257,028 net subscribers in the fourth quarter of 2009. Even more important then this being the second consecutive quarter of net subscriber additions, CEO Mel Karmazin notes that this is the first year in the companies history that they have generated a positive free cash flow for the entire year.
BMW makes the driving experience simply awesome. Now they are improving on that once again by incorporating a new satellite radio feature called Enhanced satellite Radio Channel Selection. On top of that, Sirius as an option has also become more affordable. The price for a factory installed satellite radio has been slashed from $595 to $300!
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