) reported its Q2 earnings recently that showed the company is
increasing its penetration of overall vehicle sales despite
continued softness in the economy. This is helping add subscribers
despite an uncertain outlook for the auto market. The satellite
radio company's success largely hinges on its ability to get
installed in more new and pre-owned vehicles through ties with
automobile makers such as Ford (
) and Toyota (
) allowing Sirius to grow subscribers even if auto sales slump.
Our price estimate for Sirius XM stands at just
implying a near 10% premium to the market price.
65% of New Vehicles Install Sirius
The company stated that while light vehicle sales in the U.S.
grew by 7% in Q2 compared to the same period last year, the
company's total gross additions increased by 8%. However, this
means that pure automotive subscriber gross additions must have
increased by an even higher amount since retail subscribers are
declining. The company has stated that now about 65% of the new
vehicles manufactured for sale in the U.S. install Sirius XM
In addition to the above, increased penetration in pre-owned
vehicles helped. We previously published an article mentioning
Sirius XM's recent deals with Hyundai and GM (
) to offer 3-month SiriusXM subscription on pre-owned vehicles (see
Sirius XM Earnings Preview: What We Are Watching). This factor also
played a role in healthy subscriber additions.
This earnings report is an encouraging indication for the
company given the uncertainty around recovery of the economy. Even
though there is chance that auto sales may not pick up as expected
previously, Sirius XM will likely continue its growth by increasing
penetration in both new and pre-owned vehicles.
See our complete analysis for Sirius XM's