Sirius XM Will Have a Lot to Prove on Thursday

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

This is a great time to be a Sirius XM Radio (NASDAQ: SIRI  ) investor. The satellite radio provider closed at $4.10 yesterday, and that's yet another six-year high for a company that seems to be hitting fresh multiyear highs with every passing week. It set yet another new high today. 

Remember when the stock price bottomed out at a nickel four years ago, when it seemed as if Sirius XM was going to file for bankruptcy? The stock's been a sweet 82-bagger for investors since that point.

But just as nothing grows in the shade, the same can be said of rapidly appreciating share prices. Major upticks need to be earned, and that's what will have to happen on Thursday morning when Sirius XM steps up with its fiscal third-quarter financials.

Growth and profitability have been steady and consistent at the media giant over the past few years. Analysts see revenue climbing 12% to $969.7 million, fueled by healthy subscriber growth and increasing average revenue per user. Wall Street sees profitability doubling to $0.02 a share, though it needs to be said that this would be its fourth consecutive quarter of earning $0.02 a share.

There are certainly plenty of reasons to believe that Sirius XM could surpass expectations. 

Despite last month's arrival of Apple's (NASDAQ: AAPL  ) iTunes Radio -- and Sirius XM not pre-announcing subscriber figures earlier this month as it has sometimes in the past when the news is outstanding -- there's little reason to believe that growth won't be robust. New-car sales have been booming for several quarters, and this is the lifeblood of new subscribers. Sirius XM has also been working with used-car dealers -- and more recently service centers -- to create financial incentives to get showrooms to promote the activation of dormant Sirius and XM receivers.

New accounts are naturally very incremental to Sirius XM's bottom line given its fixed overhead and earlier net operating losses that gnaw away at today's tax bite. But they also tend to pay more once they're off their free trials since they're not grandfathered into the lower rate that went away last year. They are also often given trials that include online streaming that becomes a premium add-on down the line.

As for the bottom line, it's been more than a year since the last time that Sirius XM exceeded Wall Street's profit target. Why could it be different this week? Well, Sirius XM has a ton of shares outstanding, but it has been aggressively tackling its gargantuan float. It has gobbled up $1.6 billion worth of stock over the past 10 months, and you know what happens to simple division when the numerator stays the same but the denominator gets smaller. Tack on the push for new high-margin subs, and no one should be shocked if Sirius XM manages to bunt its way to $0.03 a share on Thursday.

Yes, the quarter itself ended with Apple turning heads with the free iTunes Radio. Apple got 11 million to check it out during its first week of availability. As more new cars offer Bluetooth connectivity, won't iTunes Radio eat into satellite radio subscriptions? Well, iTunes Radio on smartphones is limited to the iPhone. Besides, Sirius XM has done just fine facing the streaming revolution.

Sirius XM will have plenty to prove in justifying its recent gains, but there's little reason to expect the financials to be anything less than solid.

Three more growth stocks to consider
If you can't wait until Thursday morning to get a read on Sirius XM, how about checking out some other potential stock market winners? The Motley Fool's special free report "3 Stocks to Own Forever" is now out. But don't let this title fool you. The most important information inside isn't a stock pick.Click here now for free access.


Read/Post Comments (0) | Recommend This Article (0)

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.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2693484, ~/Articles/ArticleHandler.aspx, 9/29/2016 11:21:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,307.02 -32.22 -0.18%
S&P 500 2,166.25 -5.12 -0.24%
NASD 5,300.17 -18.38 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 11:05 AM
SIRI $4.19 Up +0.03 +0.60%
Sirius XM Radio CAPS Rating: **
AAPL $112.56 Down -1.39 -1.22%
Apple CAPS Rating: ****