Sirius XM Radio (NASDAQ:SIRI) recently announced its partnership
with Hyundai (SEO:005380) Motor America wherein consumers
across the United States will receive a 3-month introductory
subscription to XM when they purchase Hyundai Certified Pre-Owned
vehicles equipped with XM. We believe that this will help Sirius
expand its automotive subscriber base and add significant upside to
its stock value. Sirius is a satellite radio company in United
States and is mainly distributed through automakers and retail
locations as well as through Sirius' own website. Sirius XM has
ties with major automobile manufacturers such as Ford (
) and Toyota (NYSE:TM), which help drive its presence in the
U.S. automobile space.
Sirius' closest competitors include Cumulus Media Inc. (
) (America's second largest operator of radio stations) and
Westwood One Inc. (
) (the largest provider of audio content in America), as well
as traditional AM/FM radio and internet radio offerings from
Pandora and Rhapsody.
We currently have a
price estimate of $2.00 for Sirius XM Radio's
, which implies a discount to market price.
Sirius XM and Hyundai Partnership
The tie-up between Sirius XM and Hyundai will offer Hyundai
customers access to more than 170 channels of commercial-free music
programming, sports, news, traffic updates and weather
information. Hyundai is offering a 3-month introductory
subscription to XM with the purchase of new Hyundai vehicles sold
in the United States and factory equipped with XM.
Over 12% Stock Value Upside from Automotive Subscriber
We presently estimate that Sirius XM automotive subscribers will
increase from roughly 13 million in 2010 to 25 million by the end
of our forecast period. The addition of new Hyundai customers could
accelerate the expansion of this subscriber base.
In the U.S., Hyundai sold over 11.5 million vehicles in 2010 and
had a market share of 4.6%. In January - April 2011, Hyundai sold
over 4 million vehicles in the U.S. and increased its 2011
year-to-date market share to 4.8%.
Consider the scenario where Hyundai sales in 2011 are
proportional to their year-to-date 2011 sales, and thereafter grow
conservatively by 5% every year. Further, assume that 20% of
Hyundai customers decide to subscribe to Sirius XM after the trial
period. In this scenario, total automotive subscribers of Sirius XM
could increase to 28.4 million by the end of our forecast horizon.
This would increase the implied stock value of Sirius to $2.25,
over 12% upside from
our present stock price estimate
You can drag the trend line in the interactive chart above
to test this scenario, and others, and see the potential
impact on Sirius XM Radio's stock.
See our complete analysis of Sirius XM
Radio stock here