Last week I penned an article entitled, "January Auto Sales Off To A Slow Start, Why Sirius XM Investors Need Not Worry." You would think by the tenor of the comments that I had chopped off Sirius XM (NASDAQ:SIRI) at the knees rather than point out and discuss the emergence of the used car market for the company. I followed that article up with more detail about the used car channel in a piece entitled, "Opportunity For Sirius XM As U.S. Cars Get Older: Stay Tuned." That piece seems to be one that passionate Sirius XM fans liked.
What we learn from articles like these is what to expect, and where to expect it from. I had several people point out that January sales are on a fast pace, with little else than a report from the first week that painted a rosy picture. I went so far as to ask many what number for January auto sales would be considered good. Not a single reader answered the question. What that tells me is that people are relying on hope rather than data.
Now another week has gone by, and my research into the sector is now more refined. The good news is that auto sales are pacing slightly ahead of last week. The bad news is that the pace being exhibited now may even come up short of last years January numbers.
Last year the auto sector delivered 819,419 in sales. This year the sales pace according to Edmunds looks to be on pace to deliver 795,000. In many ways this may be a shocker to the auto sector as well as to Sirius XM investors. In fact, this may be the first time in over a year that auto sales does not deliver year over year growth.
While sector analysts have not moved their overall projections for 2012 yet (Still about 13.8 million for the year), a January that does not come in ahead of last year poses certain risks for Sirius XM investors that up until now were not even a consideration.
Before readers get their dander up, let's look deeper. The risks are not real in the classic sense, but rather reactionary to the possibility of sensitivity to how January auto sales headlines are delivered.
Whether we like it or not, auto sector news impacts Sirius XM. There is now a possibility that the headlines may not be able to speak to year over year growth. In my opinion Edmunds is being a bit conservative and we will see January of 2012 come in higher that January of 2011.
Readers are likely asking why this would be brought up now. The answer is that this is news, and I report the news. I do not censor what I say based on whether or not it will be "poor timing" for Sirius XM. Next week, as we stack up auto sales this week, I will report it as I always do.
There is some interesting timing here though. We are anticipating that Sirius XM will be announcing their quarterly results somewhere between February 2nd and February 7th. January auto sales will be available between February 1st and 3rd. What this likely means is that the news of the auto sector has a chance of impacting Sirius XM.
If January of 2012 falls short of 815,000 units, the headlines could be a drag on a Sirius XM pre-conference call run. Should January sales come in over 815,000, then we could see good headlines that can allow Sirius XM investors to not have as big a sensitivity to the news.
The point here is that it is better to understand the possibilities than to be surprised by them. Regardless of the reported sales, Sirius XM will still see a significant impact from the used car market. That factor has not changed. In fact, as I anticipated and wrote about before, Sirius XM just announced a new participant in the used car market. We can now add Chrysler to GM, Nissan, and Auto Nation as OEM's with used car deals. As I have said, the used car market is the growth machine. It is important to understand that. As Sirius XM contemplates their 2012 subscriber guidance, it will likely be a number at least 10% higher than 2011's 1.7 million and approaching 1.9 million. Should we see that type of guidance, it will be on the emerging strength in used cars.
In summary, the January numbers are important because of the psychological impact they have. Sirius XM can do quite well even if January provides a sales miss. Informed investors withy the knowledge of this can react accordingly. Depending on your strategy (for active traders) it could represent entry points as well as exit points. For longer term players it can simply add some confidence to your position.
As usual...Stay Tuned
