OEM Sales Weak
The merger is still the big news in the sector, but weak subscriber numbers is an undertone that has many trying to figure out what to establish as a value for these stocks in both the near as well as the longer term.
We will soon publish the June auto sales data as we do each month, but the news is already on the street. Cars are not selling, and that represents yet another question mark on satellite radio equities.
Position – Long Sirius, Long XM
My first thought on this is that a certain percentage reduction in car sales will not automatically translate into the same percentage reduction in satellite radio subscriptions for cars. Aside from those who currently are driving broken down cars that absolutely need replacing, in this economy, the purchase of a car will be undertaken generally only by those with have disposable cash (after paying for food, rent or mortgage, etc.) So, my thinking is that, on a proportional basis, the percentage of current new car buyers who will pay for satellite service will be higher because the purchase of cars will be done more by people who have more money. Additionally, I have a feeling that even many of the well off are holding back on taking vacations, making other major purchases, etc. So, for a lousy 13 bucks a month or so spent on the pleasure of satellite radio, they can make themselves feel better. Also, with ticket prices for concerts becoming less within reach for many of us, the allure of listening to special broadcast series of our favorite artists on satellite radio may lure subscribers. For the cost of one concert, a couple can pay for a one year subscription to satellite radio and still have money left over. That’s just my two cents.
I bet American’s will probably just never buy new cars again. Car sales are probably going to zero. People will probably drive around their SUVs and inefficient cars until they explode and then start riding bikes and walking everywhere.
The time is now for the bicycle bull market! Find all the bike and shoe manufacturers you can and buy in big. We need SDARS in shoes! That’s where the money is at! The new OEM deals are going to be made with Nike, Reebok, Asics, and New Balance!
Be prepared:
Old and busted -> Vehicles
New hotness -> Shoes and Bikes
Steve I agree people are cutting back. Several of my friends that own trucks and SUV’s purchased another vehicle that is fuel efficient. The savings really pay for its self. Gas prices are taking down out economy and the housing bubble is accelerating things.
First I have to say SiriusIntentions I loved the sarcastic comment. I was going to say the samething that, it is a bad economy right now, IT IS NOT GOING TO STAY THAT WAY FOREVER. I am sure that all sales everywhere on everything are down That is why the stock market is down to where it is. So my question is why is a few bad quarters bad for just satellite radio sector. They have enough money to make it through more then a few quarters.
Thanks john.
The funniest part for me is how much of the value of SDARS is based on the next few quarters? It’s all long term. If they add less subs now then they might churn off a few more than they would have, but people will still get new cars eventually.
If the merger goes through and SDARS becomes standard, then as soon as car sales accelerate again people will buy up SDARS as a proxy of sorts for the auto sector.
SiriusIntentions, I here you. The other thing that many forget is that the fewer cars that have satellite radios in them the less cost of a subsidy for the companies. They are very close, if not there already, to being profitable if they were not paying for a subsidy. Last year they lost just over 500 million and had over 400 million paid in subsidies alone for the OEMs.