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.