Please ensure Javascript is enabled for purposes of website accessibility

Sirius XM Goes Along for the Ride

By Rick Munarriz - Apr 2, 2013 at 6:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Automakers had a great March, and the satellite radio provider isn't complaining.

The auto industry is tooting its horn, and Sirius XM Radio (SIRI -2.74%) should be coming along for the ride.

Auto tracker Edmunds predicts that U.S. car sales will clock in at 15.5 million this year, up from its earlier forecast calling for 15 million light vehicles. If so, this would be the auto industry's strongest year since 2007 -- and Edmunds feels that there's room for even more improvement come 2014 given the long average age of cars presently on the road.

Demand is there. The new cars with new toys are compelling. As long as the economy doesn't collapse, it's going to be a good time to be behind the wheel of the automotive industry.

This is naturally great news for Sirius XM. It has a roughly 68% penetration rate in the automotive industry, meaning that more than two-thirds of the new cars rolling into showrooms these days come with Sirius or XM receivers. The satellite radio provider's 45% conversion rate last year means that nearly half of the buyers of cars with satellite receivers convert into self-paying customers after their free trials run out. The rough math means that an additional 500,000 cars in the market will translate into roughly 150,000 gross subscriber additions.

There's more to the math than that, of course, but the bottom line here is that Sirius XM thrives when the automotive industry is revving higher.

Edmunds' upbeat revision comes as the major car makers posted generally positive sales reports for the month of March.

Ford and Fiat's Chrysler, in particular, had spectacular showings, with sales up 5.7% and 5%, respectively, in March. It was the strongest showing for either company since 2007. Rival automakers didn't have it as good, but the collective reports this morning was enough to get Edmunds to jack up its 2013 goal.

The car buyers are coming. Now it's up to Sirius XM to keep them.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
$6.04 (-2.74%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.