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Big Things Are Happening at Sirius XM in 2019

By Rick Munarriz - Updated Apr 24, 2019 at 10:37PM

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The satellite radio provider capped off a busy week with another step up across all of its operating metrics.

Sirius XM Holdings (SIRI -1.31%) came through with another quarter of modest yet sustainable growth on Wednesday morning. Toyota Motors (TM -1.43%) followed with a deal to boost the number of cars rolling off its assembly line with satellite radio receivers, and this all came after Pandora (P) shareholders approved the streaming radio pioneer's sale to Sirius XM a day earlier. 

Throw in a pair of analyst upgrades earlier this month, and a bullish initiation by a third Wall Street pro on Tuesday, and it seems like the investment that has been one of the market's hottest stocks over the past 10 years is still coming along nicely. It's been a strong 2019 for Sirius XM, and we're still only in January. 

Sirius XM host Jenny McCarthy and Donnie Wahlberg.

Image source: Sirius XM Holdings.

And the hits keep coming

Sirius XM had a solid fourth quarter. Revenue rose 6.6% to nearly $1.5 billion during the final three months of 2018, as a 4% uptick in subscribers combined with another marginal uptick in average revenue per user to deliver the top-line results. The scalable model continues to shine, as Sirius XM's operating profit rose 16%. Earnings improved nicely, hitting $0.06 a share. 

There weren't a lot of surprises in the financials. Sirius XM confirmed three weeks ago that it would meet or exceed its earlier guidance for the fourth quarter. It also pre-announced at the time that it had closed out 2018 with more than 34 million subscribers, including 28.9 million self-pay accounts. Sirius XM also gave its full-year outlook for 2019, and on Wednesday morning it simply reiterated those goalposts. 

The deal that it calls a "landmark agreement" with Toyota is pretty significant. Most cars these days hit showrooms with Sirius XM receivers, but this deal will make it standard equipment on all 2020 model year Toyota cars, trucks, and SUVs that will begin hitting dealerships this fall. Sirius XM has succeeded as a premium in-car entertainment platform because more and more cars come with Sirius or XM receivers. More new cars with factory-installed receivers mean a larger percentage of used cars will have them down the line. Toyota is also extending its revenue-sharing partnership with Sirius XM through 2028. 

It remains to be seen how important Pandora will be, but we know that both parties are looking forward to the combination. A whopping 97% of the votes cast by Pandora shareholders approved the acquisition offer this week. 

Sirius XM's guidance calls for modest growth in 2019. It's eyeing $6.1 billion in revenue, $2.3 billion in adjusted EBITDA, and $1.6 billion in free cash flow, rising 5.6%, 2.7%, and 5.5%, respectively, off its 2018 production. It expects to grow its self-pay subscribers by a million, its lowest increase in years. However, investors know that Sirius XM puts out historically conservative guidance that it tends to inch higher as the year plays out. In short, Sirius XM is having a strong start to 2019, and that's with 11 more months to go.

Check out the latest Sirius XM earnings call transcript.

Rick Munarriz owns shares of Pandora Media. The Motley Fool owns shares of and recommends Pandora Media. The Motley Fool has a disclosure policy.

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Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
$6.41 (-1.31%) $0.09
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Toyota Motor Corporation
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Pandora Media, Inc. Stock Quote
Pandora Media, Inc.

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