5 Reasons to Buy Sirius XM Over Ford

I was honored to be on CNBC's Closing Bell yesterday, debating the merits of Sirius XM Radio (NASDAQ: SIRI  ) with Wall Street Daily's Lou Basenese.

He began by suggesting that Ford  (NYSE: F  ) may be the better play here given satellite radio's soft subscriber growth rates, which mirror what's happening in the automotive market. I don't have a beef with Ford. I'm a Ford shareholder. I drive a Ford Flex. However, I think assuming that Sirius XM is simply a proxy for the automotive market isn't exactly fair. Let's go over a few reasons that Sirius XM may be the better investment in 2014.

1. Ford only profits on the sale of new cars.
This is the point I made on CNBC yesterday, arguing that Ford may make money on new cars, but Sirius XM also stands to benefit when those new cars with factory-installed receivers are resold. Sirius XM is counting on the used-car market to be a big driver of subscriber growth in the coming years. It's found money, since there isn't the capital requirement of a receiver.

Ford, on the other hand, doesn't cash in from a resale outside of its service centers if the owner chooses to maintain a vehicle through Ford.

2. Sirius XM doesn't have billions in unfunded pension liabilities.
This is a low blow, but it needs to be said. Ford is doing a great job in narrowing its pension plan obligations, but it's one thing that's been holding the stock back. Sirius XM naturally doesn't have earlier generations of retirees to provide for financially.

Instead of spending excess money on paying down pension liabilities, Sirius XM has spent $1.6 billion this year on buying back its own stock. 

3. Sirius XM has an easier path to increase revenue per customer.
Car prices do seem to inch higher over the years, but Sirius XM faces less resistance in milking more money out of its subscribers. No one flinched when Sirius XM increased its rates last year even though programming and content costs were declining, and customers are unlikely to leave when Sirius XM kicks in a smaller monthly rate increase next month. 

Average revenue per user has increased from $11.66 during the third quarter of 2011 to $12.29 two years later. This should only continue to increase as Sirius XM expands its offerings after acquiring Agero's connective vehicles business and ramping up its digital offerings. Ford's increases are dictated by what the competition is doing, but Sirius XM is free to test its own elasticity.

4. What will sting Ford's bottom line in 2014 will be good for Sirius XM.
Shares of Ford took a hit earlier this month when it hosed down its outlook, but a lot of the factors that will weigh on the car giant's bottom line either don't apply to Sirius XM or could be beneficial. Weakness in Europe and currency devaluations in Latin America are no skin off Sirius XM's back. Ford's operating margins contracting as it introduces nearly two dozen new or refreshed models will sting the company's bottom line, but will excite buyers who will snap up the new rides with Sirius receivers.

5. Sirius XM will be growing faster in 2014. 
Analysts see Ford growing its revenue 2% in 2014, but they also see Sirius XM growing its top line five times faster. Ford is a great investment for many reasons, but Sirius XM is worthy of its premium as a growth stock for investors willing to take on the riskier play.

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  • Report this Comment On December 31, 2013, at 9:07 AM, timpex wrote:

    What happens when Howard Stern leaves Sirius?

  • Report this Comment On December 31, 2013, at 9:54 AM, nofoolingforme wrote:

    Rick:

    I watched the so-called debate and was hoping that you would raise several important points. "Loud-mouth Lou" was way off base. He walked and talked over you like a school yard bully and showed a lack of knowledge of the issues. He kept pumping Apple and Google and stating that they would run Siri into the ground. He seems to think that the sun and moon rise because those two companies are in the world.

    Apple and Google may be a threat to Pandora and other internet music platforms, but, Sirius is much more than internet music even though that is one of their offerings. By the way, the recent acquisition of Agero will only strengthen it's position in that area of product delivery.

    What are some of the things which place Siri in a category of it's own and make it so popular?

    -ubiquitousness (no signal loss within North America and ease of use sure beats fiddling with the internet);

    -commercial free music with special broadcasts and relevant programing which is on the cutting-edge of today's tastes and current events;

    -low price entertainment through one price monthly or yearly subscriptions giving you unlimited access with no added, hidden charges to fear (data usage is not free);

    -unsurpassed content that you will not find anywhere else and which will be difficult, if not impossible, to match.

    Will Apple and Google want to invest billions in the content side, outbidding Sirius for the big-name talent they have amassed over many years? Firstly, they will have to wait for most of these contracts to expire many years from now. Unless they do so, they cannot hope to steal away the Siri subcribers, who pay a nominal amount (less than $200 a year), for a wide and growing variety of entertainment which they enjoy and want to keep at the touch of a button. Beating Pandora at its game will be much much easier and more likely.

    I think that Apple and Google have other areas that they are intent to concentrate on expanding and develping- television and wearable technoprops.

    The topic of your debate was actually quite meaningless. The value of Sirius and it's relevance, is not about just Ford or any specific company, at all, with the possible exception of Liberty Media. Sirius radios are installed in vehicles made by all of the major auto manufacturers as well as in homes, offices and commercial locations. They are a selling feature for car companies and their products.

    Does "Loose-lipped Lou" even know that? Does he think that these companies would continue to invest in having Sirius take up their valuable dashboard space, if they did not know the marketing value of it and thought that there was no future for satellite radio? Today's dashboards are tomorrow's personalized billboards and Sirius controls the centerpiece of that media platform! Investors will wake up to this fact and see the relevance of the Agero purchase in a much clearer light!

    I guess that "Loopy Lou" knows better than the auto guys do. Who the heck is he, anyway?! (Cramer is loud, but, at least he is likeable.)

    Rick, he strayed from the topic and you should have done so, too, in order to counter his uniformed commentary, on a topic that he seems totally unqualified to debate.

    I like reading your articles, but, with all due respect, you are a much better writer than debater. Maybe a Dale Carnegie course would help you to stand up to bully debaters like "Lou the Loser".

  • Report this Comment On December 31, 2013, at 11:26 AM, tjtoretire wrote:

    Rick

    I have to agree, you are a technical writer and not a polished debater. You got unnerved by someone who could have been easily pinned. Your debate was awkward at best.

  • Report this Comment On December 31, 2013, at 5:38 PM, edwardstewart wrote:

    Rick that guy was a pretty boy "duce" bag. Instead of listening to you while you were speaking he was just shaking his head no.

    Very uncool, but he was there to just blovinate and sell some false concepts.

    You are on the money with Google and others wanting to get into tv / movie end. Radio for them will just be a "yea we do that too" but they are not looking to eat up anyone at this point. Now if Google started shooting up sats of their own... that's another story.

  • Report this Comment On January 01, 2014, at 8:17 AM, zukerman wrote:

    Wow! Was that Rick Munarriz defending Sirius when it counts? CNBC has never liked Sirius for obvious reasons and Rick should be congratulated for his bravery when defending us against the hoards that will certainly be pounding the theme of lost subs in the next Q. Ford was the one that said they didn't need a bailout when GM was choking on legacy costs associated with bloated salaries paid to union contracts and only benefited when concessions were made at GM. If you were to look at debt after the bailout you'd see that GM is in a far better position than Ford is. The union now owns around 15% of GM as a way to pay it's legacy costs in the future. So I ask you, who will have the biggest problem with painful strikes in the future? When the recession hit Sirius did quite well because those that subscribed didn't worry about $200/yr so the hit wasn't so big. Not so with the major car companies who struggle with lagging sales worldwide. CNBC's job is to slam Sirius and it has been since we were much smaller and less profitable. I personally hope they are successful in many taking short positions as the squeeze will be that much more enjoyable come Q3 2014. I now have a greater respect for Mr Munarriz when it counts.

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