We reaffirm our Neutral recommendation on SIRIUS XM. The company
reported third-quarter 2013 financial results, where both the top
and the bottom line missed the respective Zacks Consensus Estimate.
Despite strong revenues, adjusted EBITDA, free cash flow and
subscriber growth, SIRIUS XM is largely dependent on the future of
the U.S. auto industry, which at present is poised for strong
growth. The company holds an estimated 69% market share of the new
cars sold. Therefore, even a minor fluctuation in auto sales may
significantly affect the company's financials. In order to counter
this problem, management has decided to foray into the telematics
business. We believe that the proposed acquisition of the connected
vehicle services division of Agero will be a long-term positive for
the company. Meanwhile, the stock price has soared nearly 45% in
the last year.
Headquartered in New York, SIRIUS XM Radio Inc. (SIRI) was
founded in 1990. At the time of incorporation, the company was
known as SIRIUS Satellite Radio Inc. On Jul 28, 2008, its wholly
owned subsidiary, Vernon Merger Corporation, merged with XM
Satellite Radio Holdings Inc. As a result, XM Satellite Radio
Holdings Inc. became a wholly owned subsidiary of SIRIUS Satellite
Radio Inc. In Aug 2008, the merged entity changed its name to
SIRIUS XM Radio Inc. The company provides satellite radio services
in the U.S. and Canada. The SIRIUS system consists of 4 in-orbit
satellites, over 125 terrestrial repeaters, satellite uplink
facilities and studios. The XM system consists of 4 in-orbit
satellites, over 650 terrestrial repeaters, satellite uplink
facilities and studios. Subscribers can also listen to music and
other channels over the Internet. SIRIUS XM's satellite radios are
primarily distributed through automakers, retailers and its
SIRIUS XM reports in four revenue generating segments:
Subscriber Revenues: This segment consists of subscription fees,
activation fees and the effects of rebates. The segment generated
87% of the total revenue in the first half of 2013.
Advertising Revenues: This segment includes the sale of
advertising on the company's non-music channels, net of agency fees
and accounted for 2.3% of the total revenue in the first half of
Equipment Revenues: This segment includes revenues and royalties
from the sale of SIRIUS and XM radios, components and accessories,
generating 2% of the total revenue in the first half of 2013.
Other Revenues: This segment offers ancillary services, such as
Backseat TV, data and weather services. The segment generated 8.7%
of the total revenue in the first half of 2013.
SIRIUS XM Radio Inc. (SIRI): Read the Full Research
SIRIUS XM HLDGS (SIRI): Free Stock Analysis
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