Auto Sales Projections Add More Worry to Sirius XM 148 comments
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The installation of satellite receivers into automobiles is a major component of the Sirius XM (SIRI) business model. It is the method by which most satellite radio subscribers become exposed to the service. With slumping sales in the auto channel, the prognosis for the viability of SDARS has been questioned by many on the street.
Most projections people are familiar with have 2009 as a bad year at 12,000,000 cars sold. Some analysts have been far more pessimistic. Thursday, GM announced that they too see a poor 2009 for car sales, and have adjusted their industry-wide estimate to 10.5 million cars.
A number at 10.5 million means yet another haircut off of what many had anticipated, and would seem to indicate that the sales slump may last longer than many think. With a 50% installation rate in 12,000,000 vehicles, Sirius XM would see 6,000,000 subscribers being exposed to the service, and about 3,000,000 that would elect to keep it. Now that we are at a possible 10,500,000, the installations fall to 5,250,000, and those that keep it will be about 2,625,000.
This represents a drop of potential subscribers of 375,000. While the number may not seem large, the monthly revenue from this pool would be about $4,856,250! That is a lot to give up.
Certainly there is a minimum number that the OEM channel needs to stay above to make sense for Sirius XM’s business model. In my opinion, car sales of only 10.5 million with an installation rate of 50% will fall short of the mark. The solution is to accelerate penetration to absorb the loss in sales. Get Kia, and the few manufacturers not already at 50% installation, to the plate as soon as possible. If this does not happen, it is my opinion that the already conservative guidance of Sirius XM may need to be adjusted down. This is news that is not good for the street.
I have stated many times that Sirius XM has a lot of moving parts in their business that are not in their control. Because of this, investors are leery, and more bad news could cause yet another round of worry.
Will car sales be as dismal as GM and some analysts predict? Only time will tell. I will say this. So far January is not looking great!
Position - Long Sirius XM, No Position GM
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That is exactly the type of thinking outside the box I am looking for from this company. They need to get together with MSFT and work out a deal with the ZUNE folks that would allow this type of innovative thought to come to fruition!
Everything aside, if you have read a lot of my posts, you should know I am not a SIrius cheerleader, in fact, I have a cancer and Mel post...etc...I threatened to sue..I know Ive been lied to ...all that...I have lost a substantial amount as well..
Thanks for the info, I sent you a response.
I will only make ONE assumption...They will break even cash flow sometime this year.... IF that happens....
There market cap is worth 2-3 billion easy...A lot of companies cant say they broke even...If they can break even, pay off all 09 debt, whatever the SP is at that time(or before if it is sensed, etc...) will have to be a lot higher than it is now...Even with full dilution....
So .25-.50 cents is my year out price target(any bit of news regarding new revenue streams, beating quarters, and the market overprices your stock(3-4 billion market cap) now we are looking at .50 to 1.00 SP...
So barring bankrupcy, the only writing on the wall you have going for you by the way...Going much lower from here just isnt going to happen, and if it does it will not stay there long...
If they dont make cash flow positive, they say its next year again, they take out a huge high interest loan to pay off bond holders, subs drop, then yes, they will be in bankrupcy, but not this year, and probably not next year either...
So I guess my final point is...Just what "wall" are you looking at?
Would a SP drop from 45 to 1.98 indicate possible bankrupcy? Do you think AMD is going to file bankrupcy?
How about a SP drop from 17 to 3.73? Do you think they would be going bankrupt?(82% drop)...
No AUY(Yamana gold makes money) and is not going bankrupt.
Do you think a stock drop from 2.50 to .56 cents? Going bankrupt?
No SYNM isnt, they arent even running at full capacity yet...
These are just some off my head examples of SP not dictating a failing company, but a reevaluation...With dilution comes reevaluation...They have been reevaluated, and soon they will be reevaluated again...
But right now, with the debt issue, economy, and hush hush from the CEO brainchild of Stock price doom, there is where we are...slightly worse than strong companies that experienced massive capitalization, lowered earnings, and lose of company "value". Since all "value" is relative, and market cap is just a temporary assessment of that value, one shouldnt put too much emphasis on the SP medium term(yes, Sirius has still tanked "medium term"...) I consider Sirius an IPO with massive debt issues..
If they can get better streams in the middle of nowhere , than I would start advertising this fact all over Wal Marts across America...I would have Sirius in every rural neighborhood in the country...
I would package around 10 TV channels, internet, and all Sirius and XM radio content and sell the heck out of that special package to areas that dont get cable...direct tv..or only get dial up internet..
Charge $50 for the entire service and watch the phones light up like a christamas tree..
Even if they only charged $35 a month, they would make a killing, and attract a wider range of consumer(get it all in one place(strike a deal with Pandora to be used only with Sirius internet(wave of the future I hear(you will be buying sites soon...)
Basically my point is their growth avenues are only limited to their imagination(dont you wish you owned stock in a company who could say that...) Seriously, with no debt this stock is easy 5 dollars right now, with no dilution or if XM disappeared like it would have...
You are just as much bad speculation as the entire market is right now...
STOP IT!!!!!
Look at all the positive things that are happening in the market place.
FIAT is looking to buy into Chrysler LLC. (this will improve car manufacturing and technology). This will make cars more affordable, economical, and fuel effecient.
Ford sells a hybrid FOCUS that makes better fuel economy than our import competitors (Nissan, Honda, Toyota). Ford has also refined the 2009 Ford mustang. Both models which come equipped with satellite radio.
Chevrolet sells the most powerful, economical sports car in it's class, the corvette.
In all honesty car sales look like its in a slump based upon our economys credit crisis. Our economies morgage crisis.
We had people buying cars off the 2nd morgage of there homes. Homes were ATM machines that loaned people money, that people didn't have to begin with.
All it comes down to is that the big 3 really isn't doing that bad. Lay off workers, cut production in half, re evaluate the unions and their contracts. Eventually car costs for consumers will come down, people will start buying again.
Just like real estate right now is a buyers market, so is the car market. When these markets will adjust to what the buyer are willing to pay evertthing will work out for the better.
Satellite radio is doing fine. Your speculation is horrible.
satellite radio uses many methods to get its product out into the market.
It does not depend solely on the car market as its vehicle for advertising and pushing sales.
After all ther eare other methods of advertising. Word of mouth, Direct TV, Dish Network, even cable television.
The car market slipped in the 3rd and 4th qurter of 2008, so how are you going to account for satellite radio adding 300,000 subscribers, at a1.7% churn rate?
I think you just like to add flames to the fire. Really who do you work for? Short Sellers?
cos1000, got it, thanks
I would offer him 1/4 of that to reup, and tell him that doing that will make your stock worth more, you can make it back there...
As for the internet...I dont even care, you right, it was all just random ideas, my only point was that there growth avenues are only limited to their imaginations, but right now they just need to imagine themselves paying off their 09 debts...