Sirius XM Radio
The country's largest auto retailer posted healthy March car sales this morning. AutoNation moved 22,246 vehicles last month, 19% ahead of its year-ago results. It sold 54,198 automobiles over the past three months, an increase of 23% over the first three months of last year.
Somewhere out there, Sirius XM executives and shareholders are high-fiving one another. They know that brisk car sales today will likely translate into healthy subscriber growth in the future.
Nearly half of those who buy new cars with factory-installed satellite receivers -- 46.2%, as of Sirius XM's most recent quarter -- become paying subscribers to Sirius or XM once their free trials expire.
As long as churn and conversion rates remain in check -- and they're actually improving as we claw our way out of the global economic slump -- strong auto sales are Sirius XM's best ticket to keep on beating the market.
AutoNation's encouraging March follows upbeat news from the individual automakers:
Don't read too much into Toyota's dip. Its performance is pitted against a 41% spike in year-over-year sales last March, when it was discounting its cars to combat the sting of negative recall news. All told, the automakers combined for a 17% year-over-year pop last month.
Most cars are sold with three to 12 months of complimentary satellite radio access, so last month's buyers won't be factored into Sirius XM's important "self-pay" metric right away. However, the encouraging news from automakers late last week and the leading showroom operator this morning confirm that fears of softness have been overblown.
Higher gasoline prices aren't scaring away drivers. Mandates for more fuel-efficient cars are encouraging consumers to trade in their older gas-guzzlers to offset pain at the pump.
How about last month's Japanese earthquake and tsunami? AutoNation sees disruptions over the next two quarters, but also points out that two-thirds of its Japanese cars are assembled in North America.
The auto industry and Sirius XM have a smoother road ahead than skeptics think.
Will Sirius XM always be attached at the hip to auto sales? Share your thoughts in the comment box below.
General Motors is a Motley Fool Inside Value selection. Ford Motor is a Motley Fool Stock Advisor pick. The Fool owns shares of Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the stocks in this article, except for Ford. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.