This Week in Sirius XM Radio

Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  )  moved lower on the week, slipping 0.6% to close at $3.12. The move was in line with the Nasdaq's 0.5% slide. 

There was more going on beyond the share-price gyrations, though. Sirius XM posted quarterly results, and so did Pandora (NYSE: P  ) . Meanwhile, an industry report suggests that Beats Music isn't off to such a hot start.

Let's take a closer look.

As the world earns
It's earnings season, and Sirius XM held up reasonably well. Its profit for the first quarter matched the $0.02 a share Wall Street was forecasting, and revenue growth of 11% to $997.7 million was just ahead of the $994.6 million analysts were forecasting.

The subscriber number clocked in at 25.8 million, 6% ahead of a year earlier. That was also a sequential uptick, showing that the sequential dip during the holiday quarter was just a fluke. Self-pay subscribers also gained ground during the period. 

The report wasn't perfect. Sirius XM failed to raise at least some component of its full-year guidance during the first quarter for the first time in three years. Its conversion rate also remained at a historical low 42%. Despite the scalable nature of this model, Sirius XM's operating profit barely nudged higher.

It was still an overall solid report, and the stock did close higher on the day it reported.  

Pandora checks in
Pandora reported quarterly results a few hours after Sirius XM. Adjusted revenue soared 54%, and its quarterly deficit narrowed. 

Pandora shares still tumbled 17% on Friday in response to the report. The rub this time was Pandora's guidance, calling for decelerating growth. The leading music-streaming service sees revenue checking in between $213 million and $218 million this quarter, missing Wall Street's target of $219.3 million.

That may not seem like the kind of miss that would trigger such a negative reaction, but after seeing Pandora's stock nearly triple last year, it's safe to say that expectations were high.

And the Beats goes on
Beats Music launched with a lot of hype back in January. Reality has been singing a different tune. Beats is an iconic brand in audio entertainment as a result of its flagship headphones and star-studded backers, but it's not so easy to get folks to pay $10 a month for music.

Billboard leans on record-label sources that believe Beat Music has just hundreds of thousands of premium subscribers. Given the kind of ad spending and media buzz that was generated three months ago, that's not going to be enough to make Beats Music a serious contender here.    

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  • Report this Comment On April 27, 2014, at 12:44 PM, sirifair6 wrote:

    Rick,

    At this stage of its life, Sirius needs most of all a robust fcf growth by $200M- $300M for another five years. For Q1,the fcf was extremely strong because it has traditionally been the most cash intensive Q of the year. I presume that within the next thirty days we will hear about borrowing to the tune of $1B. It is also my understanding that when siri modeled fcf for the year it most likely accounted for additional $100M-$150M debt interest. So, if they hit $1.1B fcf with the debt interest in the range of $320M this is a clear indicator of their phenomenal fcf strength.

    Concerning profit, you should know that this is the metric siri doesn't even guide. It appears that EBIDTA that siri did guide at $1.38B will easily exceed $1.4B. The question that remains is whether they will meet their adamant assurance at the CC of reaching 1.25M both net and self pay subs. They need to add at least 360K new self pay subs in the next three Qs.

    My take is that all the action is shifted to the 2nd half of the year where liberty plans to issue its new siri tracking stock. I believe siri may have four to five months for "cheap" buybacks. After that the window will be closed for good and they will have to buy back at much higher prices. The good news is that their fcf should be growing strongly as well and they may bring down the share count to 5.5B.

  • Report this Comment On April 28, 2014, at 6:42 AM, zukerman wrote:

    Hope is in the air that we'll see a slight bump on a down day in the market. It's been announced that Charter will absorb some 1.4m subscribers making them #2 in ranking after the merger of TW and Comcast. Even though the #2 ranking is by default, it will add to the bottom line for the tracking stock later this year.

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