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We're now less than a week away from the end of the third quarter, and one of the market's bigger mysteries is whether Sirius XM Radio (Nasdaq: SIRI ) is growing again.
The company shed net subscribers in each of this year's first two quarters -- going from 19 million to 18.4 million through the six months -- but there are still reasons to be optimistic.
Auto sales spiked during the "cash for clunkers" rebates promotion. The economy is showing signs of bottoming out. There are a growing number of ways to experience satellite radio, including a streaming feed via Apple's (Nasdaq: AAPL ) iPhone.
There are headwinds colliding with these tailwinds, though. August was a huge month for carmakers, but September is shaping up to be a real dud. The "cash for clunkers" crowd is also a bit dubious, since it consists of drivers of older cars with minimal trade-in value. Paying a premium for radio won't be an easy sell. On the early adopter end, Apple, Research In Motion (Nasdaq: RIMM ) , and Palm (Nasdaq: PALM ) tacked on millions of new smartphone owners during the quarter, giving more consumers access to free Internet radio on the go.
Churn is also likely to spike, after the company began charging subscribers as much as $2 a month in July to offset music royalties. The last time that Sirius XM inched rates higher was back in March, when it began charging more for secondary accounts and initiated online streaming charges. This likely contributed to the 3.3 million subscribers who have deactivated their receivers through the first six months of the year.
I think the negatives outweigh the positives when it comes to subscriber counts, though the rate hikes and cost savings should deliver better top- and bottom-line results than analysts expect. Wall Street expects Sirius XM to post a loss of $0.02 a share on a 1% year-over-year decline in revenue. I believe that Sirius XM will manage to marginally grow revenue, even as it sheds roughly 80,000 net subscribers sequentially.
So where do you think Sirius XM will stand by the end of the third quarter?
- Sirius XM posted a net subscriber loss of 404,422 in Q1.
- There were 185,999 fewer subscribers by the end of Q2.
Since Sirius XM began the quarter with 18,413,435 subscribers, my prediction calls for 18,333,435 by next week's close of the third quarter.
Don't like my 18,333,435 call? Give it a shot in the comment box below. When Sirius XM ultimately reports its results, I'll make sure I send published props to the reader who came the closest.