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Smartphone Chip Pre-Installs Could Lift Sirius Subscriber Growth
Jul. 28 2011

The recovery in the auto sector market resulted in strong auto sales last quarter, which in turn helped improve Sirius XM’s net subscriber additions. Sirius XM has ties with major automobile makers such as Ford, GM and Toyota that help drive its presence in the U.S. automobile market.

Apart from automakers, Sirius XM’s satellite radio is distributed through retail locations and its own website. Given the explosion of smartphone sales and usage, this could lift the number of retail subscribers for Sirius as our members indicate below especially if rumored new chips are pre-installed in phones that allows satellite radio delivery to phones directly vs. online take off.

We currently have a Trefis price estimate of $2 for Sirius XM Radio’s stock, which is about 5% below the current market price.

While the outlook for the company’s automobile subscribers looks positive, Sirius XM’s retail subscriptions are likely to decline with adoption of HD radio and flexibility offered by digital audio players like the iPod. While we currently expect Sirius XM’s total number of retail subscribers will decrease from 6.3 million in 2011 to 4.4 million by the end of our forecast period, Trefis members project that the decline will be smaller from 6.8 million to 6.2 million during the same period.

The member estimates imply an upside of just under 10% to our price estimate. This is possible if the company can continue to innovate by keeping apace with newer technologies and attract new users via smartphones.

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