Increased Auto Sales Will Add Up to Sirius Upgrades

If they build it, they will come. When it comes to Sirius XM (SIRI), it really is that simple. During the course of the last year or so, Sirius XM shares declined primarily on debt concerns and a declining U.S. auto market. Without exception, every Wall Street analyst cited these concerns as the reasoning behind their lowered price targets and downgrades in 2008.

With Sirius XM debt issues laid to rest, investors witnessed the equity’s nearly 200% increase during the first quarter of 2009. This week brought with it news that the automakers themselves feel that the worst is now behind us. The annual estimated run rate of new cars increased substantially; from as low as 8.5 million to as high as 10.5 million on the March sales data.

It stands to reason expectations for Sirius XM’s future would be raised on this data, when considering that a 2 million unit increase for the auto sector translates into an increase of approximately 500,000 additional new subscribers in 2009, as compared to February estimates.

Adding to this improvement in the company’s outlook is the Obama administration’s plan to drive consumers into dealership showrooms and spur growth of the U.S. auto industry. One part of the plan involves a scrap program, which according to Barclays, as quoted by CNBC’s Bob Pisani, “could boost U.S. sales by 3 million units.” Another part of the plan offers tax incentives to boost new car sales as well.

These initiatives will inevitably increase the auto sales rate to nearly 14 million units this year alone. A 6.5 million unit increase from earlier estimates translates into an increase of 1,625,000 satellite radio subscribers from earlier estimates. These are not insignificant numbers. These are the numbers that add up to profitability for Sirius XM in 2009. It is only a matter of time before Wall Street analysts jump on the proverbial bandwagon.

Position: Long Sirius XM

Comments

[tech man:]

Good article brandon, thanks for keeping us informed. Mel, do the job that we all know you can do. you have done it in the past. good product, and much needed. just listed to regular radio, it is a joke. satillite is needed. come on folks, lets get real. the is why Mel stuck with siri-xm He knows it will be a winner. just taking time. hang in there. keep the faith. your patience will pay off. t.m.

Apr 05 06:41 AM

[Tax Expert:]

I agree, the worst of the news is behind us. Analyst upgrades are coming very soon. Better than expected subscriber additions and a
reinstatement of the uptick rule will fuel the fire for SIRI stock appreciation. I would NOT want to be short SIRI at current levels.
Risk/Reward is in favor of longs. BK is no longer an issue. I think SIRI will appreciate substantially from here.

Apr 05 08:55 AM

[Thefigman:]

Anyone heard any new info on Sirius Backseat? The video streaming option for Sirius Satellite?

Just thinking the auto upturn might be a good opportunity for it to sart to develop.

Apr 06 07:52 AM

[BigVinnie:]

By May of this year I see the siri stock at .70 a share.
Retail levels although not that strong did account for some growth, to help fight the churn rate.
Also sirius now competes against slackers paid service, which I find the content of sirius/xm to be much more promising than slackers.
Sirius/xm is commercial free, slacker is commercial free if paid for. Although Sirius/xm wins hands down with it's news, and talk radio.
My brother and I both paid for the lifetime subscriptions before the march 31st deadline.

Apr 06 10:56 AM

[relmar2003:]

They didnt get the title right. Brandon sees upgrades regardless of autosales increasing, it was just one of his reasons. But the main point of the article yes. I personally dont think Sirius needs upgrades for the stock to move. Usually low priced stocks move regardless of analyst opinion, and sometimes their moves are hidden when deep in sell ratings. Then they are always slow to move it up. For instance, yahoo's one year price target on sirius was .32 cents, I believe, until they cleared it. Then they moved it to .50 cents. So how useful are professional opinions? None. Not one of them told you to buy at .05 cents like some of us did. Analyist have no balls, dont want to be wrong, and are always slow to respond to the obvious. Luckily right now its not that obvious, although it should be, and people can still get in at these incredible low already supported prices. Even with full dilution, market cap is still a huge joke.

Apr 06 08:31 PM

[BTR:]

Glad to see some have changed thier tune , on MAR 7 you said this stock would not break 30 cents . Good to see some people Finally open thier eyes .

On Apr 06 10:56 AM BigVinnie wrote:

> By May of this year I see the siri stock at .70 a share.
> Retail levels although not that strong did account for some growth,
> to help fight the churn rate.
> Also sirius now competes against slackers paid service, which I find
> the content of sirius/xm to be much more promising than slackers.
>
> Sirius/xm is commercial free, slacker is commercial free if paid
> for. Although Sirius/xm wins hands down with it's news, and talk
> radio.
> My brother and I both paid for the lifetime subscriptions before
> the march 31st deadline.

Apr 07 01:05 PM