This earnings call was unlike any I have been witness to in the past. Normally anxious investors demonstrated a remarkable calm and confidence which was matched by the Sirius XM (SIRI) management team, as it reported its second quarter results. It seems that Sirius XM has finally gotten the attention of Wall Street through stellar operating results. Having handily beaten analyst estimates on every conceivable metric, SIRI shares have already received two separate upgrades and more are likely in the days ahead.
A noticeable change occurred with regard to the number of analysts that took an interest in Sirius XM. The Q & A session that followed the call demonstrated a renewed interest in the company, as twice the number of analysts participated than have been seen in nearly two years. When it was over, Sirius XM CEO Mel Karmazin was forced to ask a question himself regarding the future of Howard Stern at Sirius XM, that he had apparently been anticipating. With not a single analyst posing the question, Karmazin offered the news that an announcement would be made prior to the third quarter conference call. His confidence suggests to many that talks are going well.
Karmazin also announced that a new line of Satellite Radios representing the future will be coming in the fourth quarter. Karmazin boldly called the new offering or offerings SatRad 2.0. That’s “two-point-oh,” a term typically associated with the Internet and software products. Perhaps Sirius XM has found a way to silence its critics that point to the Internet as significant competition to Sirius XM going forward, by developing some type of wireless, Internet based satellite radio or hybrid with more choices and features. The answer to that will come in the fourth quarter.
I looked over the filings briefly from yesterday, looking to see if any negatives existed that may have been avoided. I found none. In fact I was pleasantly surprised to see that the fall off in the retail space was cut in half in the most recent quarter which as S&P’s Tuna Amobi noted was a significant abatement as well. Self paying subscribers rose sharply, as did promotional offerings.
The company is not only growing revenues faster than any company in its associated sectors, it continues to control costs extremely effectively. SAC per user came in at a phenomenal $59, compared to a consensus of $63 and some extremist estimates as high as $79.
With a Howard Stern renewal announcement now imminent, Sirius XM shares are likely to significantly appreciate in the current quarter. The improved fundamentals could make Sirius XM the biggest winner this year. It’s time to get serious about Sirius.
Disclosure: Long SIRI