1.25 Million Reasons to Believe in Sirius XM

Sirius XM Radio (NASDAQ: SIRI  ) initiated its subscriber guidance for 2014 last week, and that 1.25 million target seems disappointing at first glance. After all, didn't it just close out 2013 with 1.66 million more accounts than it had before the year began? It was 2 million net additions the year before that, making this seemingly the second straight year of decelerating growth.

It gets worse. If we eye the 1.4 million in net additions for 2010 and the 1.7 million net adds in 2011, we're looking at what could be the satellite radio provider's weakest showing since 2009, when the auto market was imploding after the recessionary economic crisis. Forget the fact that growth on a percentage basis gets smaller as the user base expands. We're talking about its lowest absolute number of net additions in five years at a time when more cars than ever are rolling out with factory-installed receivers.

So, is it that bad, Sirius XM? It's not, and there are two important things to keep in mind here.

The first soothing nugget is that Sirius XM has historically been conservative with its guidance. Outside of its ambitious targets in late 2008 that came undone in 2009 when auto sales cratered, Sirius XM typically finds itself revising its outlook higher as the year plays itself out.

Last week we found out that Sirius XM closed out 2013 with nearly 1.7 million subs. Well, last January it was only expecting to increase its user base by 1.4 million in 2013. That figure got bumped up to 1.5 million and then 1.6 million before ultimately settling at 1.66 million.

It was the same story in 2012. Sirius XM was initially settling for just 1.3 million net additions, and a few upward revisions later it wound up having its best year as a combined company in terms of net additions, with 2 million accounts. In short, Sirius XM is a serial lowballer. Unless the economy and auto markets take a serious hit this year, you can expect that to happen again.

The other soothing nugget to keep in mind here is that, as uninspiring as 1.25 million net additions may seem, it's still incremental for this scalable model. So much of Sirius XM's costs are fixed that every new subscriber is worth more than the one that came before. Sure, there are variable costs when it comes to showroom commissions or revenue-based music licensing payments, but this is still a model where earnings and free cash flow should continue to grow faster than revenue and subscriber growth.

So don't let Sirius XM's cautionary subscriber target get you down. Key in on what would be a record 1.1 million in free cash flow, $1.38 billion in adjusted EBITDA, and $4 billion in revenue this year. As long as Sirius XM keeps moving in the right direction, that will be more than enough to expand its role as a media giant with more than just premium radio aspirations in 2014.

Satellite radio is a $4 billion market in 2014, but now let's talk trillions
U.S. News & World Report says this "Will drive the U.S. economy." And Business Insider calls it "The growth force of our time." In a special report entitled "America's $2.89 Trillion Super Weapon Revealed" you'll learn specific steps you can take to capitalize on this massive growth opportunity. But act now, because this is your shot to cash in before the fat cats on Wall Street beat you to the potentially life-changing profits. Click here now for instant access to this free report.


Read/Post Comments (3) | 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.

  • Report this Comment On January 13, 2014, at 10:00 AM, Guggerpaul wrote:

    The sub numbers are being manipulated for the attempted take over ie, giving 1 year free trials new subs will not show up for a year after they bought the car. existing sub buys a new car we loose a sub. I believe this was all orchestrated to steal the company from retail investors don't fall for it!

  • Report this Comment On January 13, 2014, at 12:54 PM, sirifair6 wrote:


    I believe it would be very useful to add that in Q4, 2013 sirius xm has changed the way it counts it subscribers with GM. This change has a huge plus since siri will have much less revenue sharing with GM than it used to, or its relationship with GM will become PROFITABLE for the company.

    As of Q4, 2013 sirius xm is no longer getting gm paid promotional subscribers. If the deal with GM remained unchanged, sirius would have picked up at least 500K new NET subs and the total count of net subscribers would have been about 2.2M for 2013. The best subscriber growth of the combined company since they merged in 2008. Here is your more proper reasoning regarding the net subsctriber growth.

    There is another much more important metric than net subscriber growth. It is self pay subscribers growth or those who are no longer in any promotional program associated with the purchase of a vehicle and pay on a monthly, annual or longer basis. This number did grow in Q4 but, in my view, not enough since siri garnerd about 1.5M self-pay subs in 2013 that is about 100K subs less than in 2012. Still, the company is healthy and growing and can focus 100% in 2014 on really what matters - subs and fcf growth.

  • Report this Comment On January 13, 2014, at 6:14 PM, sirifair6 wrote:


    There is one more moment that is obvious and I forgot to mention it. Meyer guided revenue two times in a row over $4B not for nothing. His objective is to create as much ambiguity as possible about siri's future and create a most favorable environment for liberty's ability to get sirius xm for a song.

    Anyone who can add knows that Mr. Meyer is not being truthful in his guidance. And the math is such that Meyer know that Mrf will go up in 2014 by 0.5% of siri revenue that could be as much as $15M or more for the year. Mr. Meyer knows that siri has increased its service fee by 50 cents that could be $25M or more for 2014. Mr. Meyer knows that advertisement revenue will be about $90M. Having in mind that Mr. Meyer has already confirmed that sirius xm will meet or exceed its financial guidance for 2013, we can safely assume that 2013 revenue will be on the order of $3.8B. Is Mr. Meyer treying to convince us that sirius xm will slightly more than $160M in 2014 when the company already has $40M towrad that without doing anything.

    It is difficult to say that Mr. Meyer is lying throught the nose about the company's 2014 revenue. However, it is obvious to anyone with some brain capacity to add that the number will be dedfinitely over $4B but a lot, possibly by $200M+. In pursuit of their greedy goals, these people are ready to go to a lot of legths. I leave the conclusions with the reader, if there is any.

Add your comment.

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: 2792642, ~/Articles/ArticleHandler.aspx, 9/2/2015 4:43:39 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...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 7 hours ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

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

9/1/2015 4:00 PM
SIRI $3.76 Down -0.06 -1.44%
Sirius XM Radio CAPS Rating: ***