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Sirius XM Puts the Pedal to the Metal

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Sirius XM Radio (Nasdaq: SIRI  ) hasn't forgotten where the accelerator is.

Investors are cheering as the satellite-radio giant boosted its full-year outlook this morning. Sirius XM now expects to close out the year with 750,000 more subscribers than it started with. It sees revenue of roughly $2.75 billion, adjusted operating profits of $575 million, and at least $100 million in free cash flow.

Let's put this into proper perspective by stacking this up against the original guidance that it reaffirmed just 13 days ago.

  • Net subscriber additions would be more than 500,000.
  • Pro forma revenue would be more than $2.7 billion.
  • Adjusted income from operations would clock in at $550 million.
  • Free cash flow would simply be positive.

Some of the new numbers shouldn't come as much of a surprise. Sirius XM rang up $670.6 million in revenue in its latest quarter, translating into a run rate of $2.68 billion -- and that's before the vast majority of new subscriber additions are baked in.

The subscriber-additions projection had been at 500,000 for several months, even though Ford -- and even laggards GM and Toyota -- had strung together several months of healthy car sales. Sirius XM's turnaround over the past year has been tethered to the recovery in the auto market.

Its operating profit and free cash flow are trickier to target, given all of the moving components and the perpetual flux in programming expenses and subscriber acquisition costs.

The only real mystery here is why Sirius XM didn't bump up its guidance when it had the perfect stage to do so less than two weeks ago. The stock went on to fall by 18% over the next four trading days, largely the result of sticking to its earlier guidance despite the obviously positive catalysts.

There are two likely possibilities for raising its guidance now, instead of during its first-quarter report. The first scenario is that Sirius XM truly didn't see the improving trends as potent enough to justify a rosier outlook. The second scenario -- and it's probably the one Howard Stern fans will cling to -- is that negotiations with Sirius XM's most popular celebrity are progressing nicely.

Stern isn't the only reason folks sign up for Sirius -- or tack on the "Best of Sirius" package to existing XM plans -- but he's clearly the game changer. If it becomes clear that Stern won't be renewed when his five-year deal comes up in December, you can be sure that there will be plenty of subscribers who scale back on their long-term commitments to the platform.

In the end, the upbeat outlook places momentum back on the Sirius XM playlist. Pity the shorts who get in the way.

Why do you believe that Sirius XM chose to raise its guidance today instead of when the longs really needed it 13 days ago? Share your thoughts in the comments box below.

Ford is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He owns no shares in any of the stocks in this article and is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 17, 2010, at 4:27 PM, ItAintCool wrote:

    Let the SirDouche's and Plangholes and CedTards start their bashing of the stock!

    Don't know why you keep saying that SIRI is going to tank when the facts are contrary to your opinion. I repeat "facts". Auto-sales are up, revenue is up, guidance is up and they still have the write-offs from years past in their pocket to use whenever profits really get good. And whatever debt repayments they still have 1) far away 2) been refinanced at lower interest rates.

    Seriously, you're like the guys who keep believe the apocalypse is going to happen anytime now. I truly hope you've been shorting the stock and have been losing. Because I see no other reason why you would come on here to bash a stock you have no interest in, other to troll for trolling sake.

  • Report this Comment On May 17, 2010, at 5:38 PM, WoodyDog1400 wrote:

    We will see $1.25 again once Stern signs his new contract.

  • Report this Comment On May 24, 2010, at 2:10 PM, riderm3 wrote:

    i think the people at sirius are not doing there homework. here's an example . right now i have four guys on my job that have been begging me to get them a stiletto .but when you logon to there site its out of stock. anyone who gets in my car comes out of my car impressed. so if you ask me sirius could be a lot bigger then they are but they have to open there eyes .there stiletto is so much better then the ipod. download for free ! why would you not advertise that ?

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Sirius XM Radio CAPS Rating: **