Satellite radio might not be a transitory technology after all. Shares of Sirius XM Holdings (NASDAQ:SIRI) moved higher on Wednesday after the company said it exceeded its subscriber targets for 2014.
The satellite radio monopoly closed out the year with 27.3 million subscribers, 1.75 million accounts ahead of where it was a year earlier. Self-pay net additions rose by 1.44 million during the year to hit 22.5 million. Sirius XM's earlier guidance had called for just 1.5 million total and 1.25 million self-pay net additions.
Sirius XM also revealed that revenue, adjusted EBITDA, and free cash flow for 2014 will exceed earlier forecasts when it reports its financials in a few weeks.
The strong close to 2014 -- Sirius XM tacked on 0.6 million net subscribers and 0.5 million net self-pay subscribers during the fourth quarter -- once again cements the compelling nature of satellite radio.
Sirius XM's success must eat away at naysayers that felt the country would be over satellite radio by now. Wasn't the smartphone in cahoots with the connected car supposed to make a premium audio offering obsolete? Wasn't satellite radio supposed to be just a temporary platform between terrestrial radio and Web-based streaming? Well, Sirius XM's success has silenced the skeptics.
Bears are clearing out of the former battleground stock. Only 149.3 million shares of Sirius XM were sold short as of mid-December, the company's lowest showing in more than a year. There are now less than half as many shorts as there were when interest peaked at 318.2 million last summer.
It's easy to see why the bears are moving on. Sirius XM is now an established, lucrative, and some would argue boring media giant. Its one-year beta is a ho-hum 0.85.
Bears need volatility to make some dough, and Sirius XM isn't them any assistance. How boring is Sirius XM? Well, the stock began 2014 at $3.49 and closed things out at $3.50.
Things aren't all rosy at Sirius XM. Its guidance for the year ahead, for one, is not particularly impressive.
- Its target of 1.2 million net subscriber additions is well short of the 1.75 million achieved in 2014.
- Revenue guidance of $4.4 billion matches the lowest of 13 Wall Street forecasts. The analyst average is $4.49 billion. Sirius XM announced that revenue in 2014 exceeded $4.15 billion, so we're looking at growth of no more than 6%.
- Adjusted EBITDA of $1.6 billion and free cash flow of $1.25 billion would be marginal improvements to the $1.425 billion in adjusted EBITDA and $1.12 billion in free cash flow Sirius XM collected in 2014.
However, it's also important not to read too much into these initial numbers. Sirius XM has been historically conservative in its guidance, opening up the opportunity for upward revisions along the way.
If you're still hungry for comfort, check out the guidance for 2014 that Sirius XM posted in early January of last year. It only targeted 1.25 million net subscriber additions, and wound up ringing up 1.75 million. The original forecasts for $4 billion in revenue, $1.1 billion in free cash flow, and $1.38 billion in adjusted EBITDA also got nudged higher as 2014 played out.
Sirius XM had a great 2014, regardless of what the stock chart might show. All in all, thanks to its continued outperformance of its own expectations the satellite radio provider is well positioned for a big move in 2015.
Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Sirius XM Radio. 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. The Motley Fool has a disclosure policy.