Sirius XM Goes Both Ways

Sirius XM Radio reports, and investors pull it in both directions.

Apr 24, 2014 at 3:52PM

I guess you can say that the market wasn't sure how to react to Sirius XM Radio's (NASDAQ:SIRI) quarterly report this morning. Shares of the satellite radio provider initially moved lower after offering up fresh financials for the first quarter, only to move higher an hour and change into the trading day.

Revenue climbed 11% to $997.7 million, fueled by a 6% uptick in subscribers and recent price hikes that have pushed average revenue per user higher. Analysts were only settling for $994.6 million on the top line. Adjusted earnings soared 46% to $121.4 million, but given Sirius XM's more than 6 billion shares outstanding, the cruel division math here leaves us matching Wall Street's forecast of $0.02 a share.

It's not a surprise to see adjusted earnings -- and free cash flow, up 56% for the quarter -- continue to grow faster than Sirius XM's revenue. This is a scalable model with high fixed costs and low variable expenses. As long as subscriber growth is increasing, that should change as programming and other content and servicing costs remain relatively fixed. 

Sirius also impressed with low churn and healthy subscriber growth, but it wasn't a perfect performance. The percentage of car buyers with free trials staying on as paying subscribers remained at a historical low of 42%. More important, Sirius XM didn't revise any aspects of its guidance higher. 

  • Last year at this time it bumped up its outlook for free cash flow for all of 2013.
  • A year earlier it raised its forecast for net new subscribers for all of 2012. 
  • The year before that we saw Sirius XM boost the free cash flow component of its guidance for 2011.

You have to go back four years to find the last time that a first-quarter report didn't have at least one piece of its guidance bumped higher. That isn't enough to penalize Sirius XM on a day when there are plenty of positives in its report. But Sirius XM had spoiled investors by being conservative in issuing its forecasts in recent years, juicing them up as the year would play on. Is that over?

Sirius XM paints a promising picture of its business. It pointed out during this morning's earnings call that there are just 62 million cars out there with installed Sirius or XM receivers. That figure should nearly double to 120 million in five years. But we know that it isn't that easy. The percentage of those receivers that are activated seems to decline every year, and even though Sirius XM plays up the connected car as more of an opportunity than a threat, it is something that we can't ignore if the game of conservative guidance that we've been playing has changed. 

It was a good report out of Sirius XM. It's just a shame that it wasn't a great report.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Sirius XM Radio. 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. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers