OEM Channel Already Recovered Enough For Sirius XM
I have been saying for quite some time that 1 million cars sold each month is the magic number for Sirius XM (NASDAQ:SIRI) to report positive metrics across the board. Today in an interview on Bloomberg Mel Karmazin himself confirmed that notion by stating, “…the model (OEM business model) works well with sales at 11 million…it works really well at 12 million.”
The OEM channel is where Sirius XM garners the majority of their subscribers, and is often where consumers are introduced to the quantity and quality of content Sirius XM has to offer. The has satellite radio installed in approximately 60% of the vehicles sold, and almost 47% of consumers exposed to the service elect to become self paying subscribers after their promotional period ends.
For Sirius XM the OEM channel is where the bulk of their growth will come from. While the mainstream media is focused on when OEM sales will normalize to levels of about 15 million cars sold per year, Sirius XM has found a great mix to make their own model profitable on sales of just 11 million per year. When July numbers for auto sales are announced over the next two days we will see that the average for the last four months will be in that magic range of 1 million per month.
The underlying secret here is that Sirius XM can prosper even in these tough economic times. It is often commented that Sirius XM relies heavily on the OEM channel and their performance is tied to it. While this is true, what savvy investors already know is that Sirius XM can OUTPERFORM even when the OEM channel is under-performing. Sirius XM is due to report earnings Wednesday August 4, 2010. One key component that Sirius XM will be reporting on is how their business model works in the current OEM environment.
The bottom line is even with what may be termed as as a slow recovery for car sales, and even with worries about second half sales being forecast as slower than hoped for, Sirius XM is already in the drivers seat and entering the fast lane for some numbers that should work “REALLY WELL” for Sirius XM investors in the quarters ahead.
Position – Long Sirius XM
How are they prospering when they still have yet to earn a dime?
Nice fluff though.
Bubba….
On a GAAP basis SIRI reported $41 million in earnings. On a pro-forma basis it was $4 million.
The diff. is the purchase accounting rules, but either way they made money.
Bubba, do you work fir NAB?
“for”
Spenser, it’s hard to teach accounting here.
Yep, fluff it is. Though apparently such an easy fact to overlook- or are we dealing in facts at all?
I gave you the facts above. the company has indeed reported income, even without the write-downs. Continued growth of subs will deliver continued growth in earnings over time.
“yet to earn a dime”
In Q4,’09, net income was $14 mln.
Q1,’10, it was 41,598 mln.
It’s in the quarterly reports.
If the 500+ mln. subs for this qtr. can be maintained, that puts siri at 10%+ sub. growth per year. In a recession, that is great growth for any company.
On the subject of the recession, while things have been tough for siri, it’s even tougher for the competition. It’s survival of the fitest, and siri will come out of this stronger than the competition, many of whom won’t be around anymore.
Terr. radio has political campaign money to help them survive this year but 2011 is going to be very tough for them.
Doesn’t matter what they post tomorrow….the stock is setup to be pummeled. The manipulation today was sickening. Even greater tomorrow.
Duke, you are probably right about siri getting pummeled.
Be that as it may, siri is getting stronger every qtr. and that’s what counts.
Something not mentioned is that as the total subscriber number gets larger, ad rates go up. Again, a key rev. number moving in the right direction.
SIRI has been on a steady trend of positive reporting (or better than expected numbers), gaining ground on their dept as well,, I now await their quarterly report in hopes that Wall street will start playing fair with SIRI..
Thanks
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buy,buy,buy