I've been editing, reading, and learning about Sirius XM
I understand some of the defensiveness. You own shares in a company you believe in, you're constantly under fire by short-sellers, and so you feel the need to guard what you see to be a reasonably sound investment decision.
I understand -- I really do.
So let's just pretend this is a cordial conversation between two old friends; you are a Sirius XM investor and a fan as well, and I'm someone who's thinking about buying some shares.
I'm unsure if I want to invest in a company that is as volatile as Sirius XM and am questioning the stock's ability to appreciate over time. "Let's go over some of the highlights," you say to me.
- It was little more than a year ago when the company was left for dead -- a $0.05 penny stock that was staring bankruptcy straight in the face. Today it is a totally viable business that has had three consecutive quarters of breakeven results. Sirius is one heck of a turnaround story.
- Sirius narrowly escaped being delisted from Nasdaq because it was able to keep its shares above the $1 requirement for 10 consecutive days.
- On the back of a strong auto recovery from companies like Ford
(NYSE: F)and General Motors, Sirius has been able to significantly increase its subscriber base. Today it has over 18.9 million subscribers; the only companies with more of a subscriber presence are DirecTV (NYSE: DTV)and Comcast. It's on pace to reach 19.9 million subscribers by the end of this year. That's quite an accomplishment.
- During the first quarter of the year, Sirius was not only able to boost its listening base, but it also slightly decreased churn, increased its conversion rate to 45.2%, and managed to squeeze more dollars out of its customers (average revenue per user).
Sounds great, right?
There's absolutely no denying that Sirius XM is a fundamentally sound business, with built-out technology and a rapidly increasing market from which to sell. They've barely even begun to tap the rental-car segment, of which it only commands 7% market share -- so Sirius may not be as dependent on Ford and Toyota
But I do have my concerns.
First is that Sirius now has 6.3 billion shares outstanding -- after accounting for Liberty Capital's
Despite increasing sales from original equipment manufacturers and rental cars, retail sales have consistently been dwindling. While the boost from car manufacturers has more than offset any loss, it would still be nice to see retail sales holding still or marginally improving.
Lastly, I'm nervous that there are too many avenues for people to explore when it comes to listening to music. Pandora has gained a lot of traction through Apple's
The Foolish bottom line
I guess now that we've come to the end of our conversation, I really only have one final question:
What is it about Sirius XM that will make the stock outperform the market over the next two, three, or five years? Is it the valuation? The rapid growth opportunity?
Now remember: This is not a battle cry or a call to arms. This is a simple question, so let's just examine the company's strengths and weaknesses, and see if we can't come to a conclusion about the future of Sirius.
Sound off in the comments box below -- I look forward to reading your thoughts!
Jordan DiPietro owns no shares mentioned above. Google is a Motley Fool Rule Breakers recommendation. Apple and Ford Motor are Motley Fool Stock Advisor picks. The Fool owns shares of Google. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.