For context, SiriusXM shares had tanked in March from $6.34 per share to $4.81 per share, a 24.1% decline, due to concerns about how the business would fare in the new environment. So despite the April surge, the stock is still down about 22.1% since the end of February.
Heading into April, investors had been concerned about SiriusXM's ability to retain and grow subscribers in the current environment. One risk that's unique to SiriusXM is the vast majority of subscribers listen to the service in their cars. Much of that occurs during commutes to work and other driving, but most of that isn't happening right now.
In addition, the vast majority of SiriusXM's new subscribers come from the free trials they receive when they buy a new car. But that new-subscriber acquisition funnel has been decimated as new car sales are estimated to have fallen by over 50% in April.
On the other hand, SiriusXM's subscriber base tends to skew affluent. For that demographic, SiriusXM's average monthly cost of about $14 is probably not going to break the bank. Many subscribers are probably saving far more than that by not traveling, buying gasoline, or going out to restaurants, bars, or other entertainment venues.
SiriusXM's first-quarter earnings report, released on April 28, showed the company added just 69,000 net new self-pay subscribers in the quarter. For context, SiriusXM added 1.1 million net new self-pay subscribers last year, and management's prior guidance called for over 900,000 net new self-pay subscribers this year. Obviously, 69,000 in one quarter falls well short of an "over 900,000" annual pace. That's why it's not surprising management withdrew its full-year guidance with its first-quarter report.
It will be interesting to watch the extent to which new car sales rebound from these depressed levels, and what impact that has on SiriusXM's net new self-pay subscriber additions. Investors should certainly expect SiriusXM to add fewer net new subscribers as long as new car sales are down so much. The company also faces long-term risks. At the same time, it's a decent bet that the existing subscriber base will remain fairly sticky.