October Auto Sales Look Positive for Sirius XM

By Brandon Matthews

In an exclusive Satwaves Radio interview last week with Senior Analyst Jessica Caldwell of Edmunds.com, Miss Caldwell predicted October auto sales of just over 800,000 units. The results are in, and the the total number of new cars and light trucks sold for the month of October is 804,748. Congratulations Jessica on making that call.

Positive Satellite Radio subscriber growth occurs when the SAAR rate (Seasonally Adjusted Annual Rate) is over 10 million units. The SAAR rate currently stands at 10.3-10.5M for 2009, and early estimates call for 11.5M in 2010, which is still a far cry from past years when the SAAR rate was 16 million. Although the auto industry focuses on year-over-year sales, I am just as concerned with monthly and quarterly data as well as future SAAR projections.

October sales of 804,748 again put Sirius XM Radio’s (SIRI) subscriber growth on the cusp of OEM growth, as the first third of Q4 2009 is completed. Looking at that number alone, one might be tempted to extrapolate that 804k throughout the quarter and come to a conclusion that 2.4 million vehicles will be sold, which would seemingly fall slightly short of the quarterly mark of 2.5 million. The number is a bit misleading. September 2009 sales came in at 748,434 which means that on a month to month basis, an uptick in new car sales has occurred, giving merit to forecasts of higher sales going forward.

As a new model year takes hold, penetration rates are likely to have increased across all manufacturers. As history has demonstrated, higher penetration rates offset lower OEM sales. Of increasing importance, is not so much how many cars were sold but which models made up the bulk of those sales. For example, Hyundai (HYMLF.PK) and Kia which boast 100% Satellite Radio penetration rates have seen sales rise significantly throughout the year. Toyota (TM) has not seen historic overall sales, yet sales of the Satellite Radio equipped 2010 Toyota Camry continue to excel with 30,136 Camrys being sold in October. Other manufacturer data can be found in the chart below. [click to enlarge]

Position: Long SIRI

Comments

[R A F]

Sirius XM Radio will continue to be in strong demand in all new car installations into the future, as the combination of superb content and delivery is simply unmatchable by any other stream of audio. The variety of content and ease of use - no need to formulate playlists, etc. - and proprietary combination of music, news, sports, comedy and commentary are simply unavailable elsewhere and a great value to subscribers once they are exposed to all this. Likewise, the clarity of audio and seamless availability anywhere one travels across the country makes terrestrial radio pale by comparison. This is clearly the next generation and there is no doubt that a great majority of the new cars underway in the replacement of the aging US auto fleet will provide this capability.

It's all about a superb combination of CONTENT and distribution. If you want a prime example of the potential for this combination to take hold and eventually overwhelm previous forms of so-called competition - look no further than BLOOMBERG. The business model for this company in the early '80's was to match superb content with innovative new technology of distribution - and this propelled the company from its infancy to eventual overwhelming dominance in the industry.

Sirius XM is in the early stages of a remarkable turnaround, employing much of the same business strategy and it will take a bit more time for this to translate into the increasingly strong revenue streams that will follow the developments recently put in place.

For all these reasons, it is advisable that the company continue to grow its way toward the strength that lies ahead before any plans for a reverse-split are contemplated. It is my opinion that a reverse-split would make sense only after the company has clearly demonstrated that it is acting from strength - and not merely to reset a share price above 1.00. The path the company is now on will surely lead to this strength and recovery over 1.00 within a normal time horizon and it is in the shareholder's best interests to let this play out as the great combination of content and delivery solidifies and strengthens into the future.

2009 Nov 04 09:34 AM

[1more4me]

Brandon,
Excellent information. I certainly appreciate the time and effort you put into your research. Your articles are both informative and time saving. Such in depth analysis and factual detail is hard to find elsewhere.
Thanks,

PEACE and GREEN TRADES!

2009 Nov 04 09:36 AM

[Pell]

Today's stock range already with more than 5 million shares traded. .6017 to .6239 doesn't anybody get it?

Sorry for being the voice of reason here. But I cannot understand why stating the simple fundamental of the need for R&D cash in this industry is extremely necessary.

I am Siri Longer here so why do people ignore simple business strategy.

Or is this the wrong format for stating actual educated opinion? I am not insulting anyone with that statement but it is obvious.

People on here do not understand how high speed trading (Day Trading by Investment Firms) affect the progress of an upward trend to a penny stock and the simple fact that SIRIXM under its current model is incapable of funding any real R&D.

And finally for those like myself who use common sense, why would Liberty and Dish fight over who would loan SiriusXM money unless there was greater positioning benefit for future M&A.

Even all the experts within the media circle are stating there will be a lot of M&A within the sector.

All us longers benefit from these developments. Why is that so hard to understand unless there are shorter disquising themselves as longers trying to keep the price down?

2009 Nov 04 09:59 AM

[User 403498]

Has it occurred to anybody that with negative net worth of 4.5 bil and negative working capital, SIRI might not be a good investment? Trade, maybe, if you can catch the right swings. But when the music stops, hope that you have a chair.

2009 Nov 04 10:55 AM

[JamesPS]

The future of Satradio is bright. From any angle...Year over year car sales have no where to go but up....Growth from iPhone and SmartPhone Subs that didn't exist before...Expansion into other areas (Costa Rica, Hawaii, and possibly overseas is not too far away)...Critical Mass is not too far away (as subs grow, the market will hit critical mass, like the iphone did, and sub growth will increase at a greater rate)....Cost controls like renegotiating expensive contracts, and elimination of redundency will continue to reduce operating expenses...and all of this tied into the best exclusive content available. I see almost no downside except for the psycological impact of a reverse split and stock price manipulation via naked short selling. Its difficult to find reasons not to like this company.

2009 Nov 04 11:37 AM

[between the hedges_]

Mel is completely incentivized with options and covered by a great wing man John Malone to perform. Mel can surprise with new revenue generating ideas. This product is becoming more and more superior with new gadgetry. Everyone loves it. Just takes a while to jump on board. Lets take a look into the future. Lets say subs surge to 30 mill. 30 mill x $17 per month x 12 month = over 6 billion in annual revenue. As cars continue and continue to put in satellite radios, this number is not out of reach. Throw in ad bucks, other product rev (back seat TV), military contracts with Coast Guard and Navy, corporate subs, and you have a very profitable company. The only two short term problems which rapidly drove the stock down were 1. inability to refinance, and 2. auto market break down. Both elements are vanishing. 1. Inability to refi is gone. They refi'd. 2. As you can tell, auto market is returning. Be short if you dare.

2009 Nov 04 11:41 AM

[between the hedges_]

Tick tock tick tock shorts can't stop the clock tick tock tick tock four hours left until the revelation tick tock tick tock autos rebounding debt refinanced tick tock tick tock sky dock tick tock apple store tick tock four hours left to cover.

2009 Nov 04 11:49 AM

[BigVinnie]

You really have no clue how this company works. Established NET worth is 7.7billion in assets and growing. 3.8 billion owed by 2015 deadline and slowly diminishing, and as well refinancing it's debt along the way. So positive worth of the company is 3.9 billion estimated. The company made $78,000 in cash in one of the worst quarters in history, generates 2.75 billion annually in the worst 1/4 of history, and will generate near 3.2billion by end of next year.


On Nov 04 10:55 AM User 403498 wrote:

> Has it occurred to anybody that with negative net worth of 4.5 bil
> and negative working capital, SIRI might not be a good investment?
> Trade, maybe, if you can catch the right swings. But when the music
> stops, hope that you have a chair.

2009 Nov 04 12:17 PM

[Pell]

I agree between the hedges when you say wing man. Thats the key, but don't forget the wing man's money. That money is needed to develop the ideas.

I knew we would eventually agree.

I guess I don't express myself the right way.


On Nov 04 11:41 AM between the hedges_ wrote:

> Mel is completely incentivized with options and covered by a great
> wing man John Malone to perform. Mel can surprise with new revenue
> generating ideas. This product is becoming more and more superior
> with new gadgetry. Everyone loves it. Just takes a while to jump
> on board. Lets take a look into the future. Lets say subs surge to
> 30 mill. 30 mill x $17 per month x 12 month = over 6 billion in annual
> revenue. As cars continue and continue to put in satellite radios,
> this number is not out of reach. Throw in ad bucks, other product
> rev (back seat TV), military contracts with Coast Guard and Navy,
> corporate subs, and you have a very profitable company. The only
> two short term problems which rapidly drove the stock down were 1.
> inability to refinance, and 2. auto market break down. Both elements
> are vanishing. 1. Inability to refi is gone. They refi'd. 2. As you
> can tell, auto market is returning. Be short if you dare.

2009 Nov 04 12:46 PM

[between the hedges_]

Pell: Pull at 10 year chart. No reverse split before when times were rough. No reverse split now. The stock roared back from current levels. No one saw Howard coming. Hit the shorts like a ton of bricks. Mel can pull rabbits out of hats. He has done it before. No justification to short anymore. Debt refied, autos rebounding, and new gadgetry/lines of business (corporate, military, used cars, rental cars, Apple customers) galore. 2 hours 20 minutes to Doomsday for shorts.

2009 Nov 04 01:41 PM

[between the hedges_]

If I were short, I would definitely have access to after market because the onslaught will occur from 6am to 9:30am before you can cover.

2009 Nov 04 01:44 PM

[between the hedges_]

Dec 2002: $.62 Dec 2004 $7.62

2009 Nov 04 01:52 PM

[Pell]

Between the hedges on this point we disagree. The company has no money for R&D which Malone and Liberty could provide. 3.9 billion shares outstanding is plain ole silly for this company when Liberty and Dish have roughly 450 million shares outstanding. A higher share value associated with the R/S along with less shares outstanding to borrow would help eliminate shorters and high speed trading (day trading by investment firms).

Once that takes place Mel could negotiate with a little more leverage with Malone with no threat of delisting (Whether it is a real occurance or not it is still there) and hopefully have the share price go up further during negotiations since there may be more institutional investors and international investors looking to long this stock as well. At its current value even if it goes up to $1, none of that is possible. It will never be able to maintain a $1 value for a consecutive 30 day period with 3.9 billion shares outstanding.

I am hoping you could think that through and maybe explain it better.


On Nov 04 01:41 PM between the hedges_ wrote:

> Pell: Pull at 10 year chart. No reverse split before when times were
> rough. No reverse split now. The stock roared back from current levels.
> No one saw Howard coming. Hit the shorts like a ton of bricks. Mel
> can pull rabbits out of hats. He has done it before. No justification
> to short anymore. Debt refied, autos rebounding, and new gadgetry/lines
> of business (corporate, military, used cars, rental cars, Apple customers)
> galore. 2 hours 20 minutes to Doomsday for shorts.

2009 Nov 04 02:06 PM

[between the hedges_]

16 hours left until Dooms day for shorts and Pell's education.

2009 Nov 04 02:09 PM

[Pell]

The numbers will be good the price per share will go up but it will not stabilize over $1 for 30 consecutive days (As is necessary to satisfy delisting) with 3.9 billion shares outstanding.

Between the hedges that is a fundamentally sound statement.

The rest on needing Liberty to buy them so they could provide cash for R&D is speculative on my part but makes a whole lot of sense because the death of every great idea and product (which Sirius is!) is insufficient capital to take to the next level. And that statement is business 101.

So I agree 3Q numbers will be good and PPS will go up, we disagree that an upward rise is sustainable with 3.9 Billion shares outstanding.


On Nov 04 02:09 PM between the hedges_ wrote:

> 16 hours left until Dooms day for shorts and Pell's education.

2009 Nov 04 02:26 PM

[between the hedges_]

Lets wait and see 3q and 4q before we assume a reverse stock split. There are other ways to get the number of shares down. If revenue and cost cutting picture continues to improve, a repurchase program could be in the works. True there are a large number of shares out there, but at their low price, a repurchase program could reduce the number and improve existing shareholder value. With autos improving, I would entertain that before R&D. I'm actually very impressed with the new line up of radios.

2009 Nov 04 02:31 PM

[connorport]

Tell that to the investors over at RAD. No hope for growth for years but the stock popped the dollar mark and has stayed above since. If the news tomorrow is good the stock will easily hold over a dollar. The stock value needs to be a lot higher even if a RS is eventually implemented. I think Mel and SIRI management have this horse under control. We shall see what SIRI brings us in the AM.


On Nov 04 02:26 PM Pell wrote:

> The numbers will be good the price per share will go up but it will
> not stabilize over $1 for 30 consecutive days (As is necessary to
> satisfy delisting) with 3.9 billion shares outstanding.
>
> Between the hedges that is a fundamentally sound statement.
>
> The rest on needing Liberty to buy them so they could provide cash
> for R&D is speculative on my part but makes a whole lot of sense
> because the death of every great idea and product (which Sirius is!)
> is insufficient capital to take to the next level. And that statement
> is business 101.
>
> So I agree 3Q numbers will be good and PPS will go up, we disagree
> that an upward rise is sustainable with 3.9 Billion shares outstanding.
>

2009 Nov 04 02:33 PM

[between the hedges_]

DJ Pell: You can not stop the autos from putting the radios in the cars. Quit FM and go to Sirius.

Short Pell: There is no need to rush to reverse split this stock. Mel has authority to do so and plenty of time to do so. He has been at this business for longer than you and I have been born.

Long Pell: About the only correct thing that you have said is Sirius is a buy out candidate. If I had the money, I'd offer 4-5 bill for this co. I think that it is worth it as you can't stop the autos from putting the radios in the cars. All the auto companies love the radios.

1 hour 15 min left of trading, unless you have after hours priviledges. If you are short, god, I hope you do so that you can cover sometime between now and 6am.

2009 Nov 04 02:44 PM

[Pell]

Thats were you are wrong again. If they don't have money for R&D why would they buy back shares when they can improve there position by simple mathematics.

I am truly Long here Between the hedges.... the same cannot be said for you if you continue to wish this companies share price be controlled by high speed trading (investment firm day traders).


On Nov 04 02:31 PM between the hedges_ wrote:

> Lets wait and see 3q and 4q before we assume a reverse stock split.
> There are other ways to get the number of shares down. If revenue
> and cost cutting picture continues to improve, a repurchase program
> could be in the works. True there are a large number of shares out
> there, but at their low price, a repurchase program could reduce
> the number and improve existing shareholder value. With autos improving,
> I would entertain that before R&D. I'm actually very impressed
> with the new line up of radios.

2009 Nov 04 02:52 PM

[Pell]

Connorport are you serious?

RAD has 40% insider holdings compared to 2% by siriXM
RAD has 888 million shares outstanding compared to SiriXM having 3.9 Billion shares.

Not a good comparison.


On Nov 04 02:33 PM connorport wrote:

> Tell that to the investors over at RAD. No hope for growth for years
> but the stock popped the dollar mark and has stayed above since.
> If the news tomorrow is good the stock will easily hold over a dollar.
> The stock value needs to be a lot higher even if a RS is eventually
> implemented. I think Mel and SIRI management have this horse under
> control. We shall see what SIRI brings us in the AM.

2009 Nov 04 02:54 PM