Sirius XM Is an Easy Rider

Petite cars? Two wheels? If you're rolling down the street, you're in Sirius XM Radio's (Nasdaq: SIRI  ) crosshairs.

The satellite radio giant struck deals with MINI USA and BMW Motorcycles -- both BMW appendages -- to offer Sirius satellite receivers as standard equipment beginning with the 2011 model year vehicles. The radios will come with a free year of Sirius Everything. If Sirius XM's future is anything like its past, roughly half of those installations will convert into self-paying customers after the trial is up.

Sure, it's hard to see a lot of helmet-donning motorcycle riders ponying up for premium radio. The diminutive BMW Minis stand a better shot at conversion, but it's not as if the car is a popular choice for commuting carpools.

The key here is that these are new deals that will result in incremental subscriptions. Sirius XM is rolling these days, tacking on net subscribers in each of the past five quarters. After topping the 20 million mark a few weeks ago, it's safe to assume that the streak will stretch to six quarters.

How big can Sirius XM get? Two years ago, the freshly merged company targeted 28.4 million subscribers by 2013. Then again, that was also during a more optimistic time when it was also projecting 22.1 million subscribers by the end of this year. When the bottom fell out of the new auto sales market, Sirius XM felt the pain alongside Ford (NYSE: F  ) and General Motors (NYSE: GM  ) . Now that cars are moving off the showroom floor again, there's little reason to expect subscriber accounts to decline the way they did during the first half of 2009.

Are we closing in on market saturation? No. Paying for radio may never be appealing outside of active drivers, but there's still a big enough market there to tap. One also has to consider that Howard Stern's new five-year deal includes mobile streaming. Sirius XM has rolled out smartphone apps for Apple, Research In Motion, and Google Android devices, but that was lacking Stern and some of Sirius XM's play-by-play sports coverage. Now that Stern is on board, there is no excuse if mobile streaming doesn't take off for Sirius XM -- save for perhaps the stiff price.

Bears aren't comfortable with this kind of buoyant upside, so it's not a surprise to see another wave of short covering drive shares of Sirius XM to nearly a new two-year high today. Yes, the stock was substantially lower in November 2008 when the subscriber targets were much higher than today's reality, but there was also a great deal of financial uncertainty at the time. Sirius XM has cleaned up nicely, and now -- like soon-to-be subscribers on BMW motorbikes -- it's an easy rider.

General Motors and Google are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers pick. Apple and Ford Motor are Motley Fool Stock Advisor choices. The Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He 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.


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  • Report this Comment On December 22, 2010, at 9:45 PM, back9pt wrote:

    Rick

    The addition of BMW motorcycles to the lineup will be a sub generator. Traveling on a motorcycle...not much to listen to out on the road...the wife...mp3...SiriusXM...Hmm...I'll take SiriusXM! Both the wife and the mp3 get old!

  • Report this Comment On December 22, 2010, at 10:03 PM, 702nitro wrote:

    A perfect marriage indeed. Next should be Harley cruisers!

    I can relate. I ride a street bike and it gets very lonely at times and won't even entertain the idea of using an iPod for safety reasons, not only for the hand fumbling but to be aware of your surrounding. But the good thing about cruisers is that it is wide open and allows for that kind of relaxed riding. A lot of road warriors will really like the service and keep them entertained for those long or short journeys.

    So we got motorcycles what is next?

  • Report this Comment On December 23, 2010, at 6:14 AM, Austin77478 wrote:

    Balanced article! Is this a good sign from MF? The jury will still be out there. Sirius' SAC is improving. SAAR is going to be concomitant to the improving economy.

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