The recent June sales numbers have made people enthusiastic about the auto industry, but strong auto sales can be good for other companies as well. For example, Sirius XM Radio (SIRI) has been enjoying its own positive reports that are closely related to the success of the auto industry. Pandora Media (P), Apple (AAPL), and Google (GOOG) may also benefit from this, but it will be to a much smaller degree. Sirius is the company that gains the most from this industry, and I believe it would be a solid investment at the moment.
Sirius is currently trading around $2, and it has been on an upward trend in July so far. Its 52-week range is $1.27 to $2.41. Although the 52-week high occurred in April, I believe Sirius will be moving closer to this price once again. Its current market cap is $9.74 billion, and its trailing P/E is 26.12. Its revenue per share (trailing twelve months) is $0.83.
Sirius recently raised its expectations for how many subscribers it will add by the end of the year. Its current estimate is for 1.6 million new subscribers, which is a significant amount higher than its previous forecast of 1.3 million. It added 622,042 net subscribers in the second quarter, which is 38% higher than its numbers from last year. This also exceeded expectations from analysts, so this shows that the company is already growing stronger. It has already added over one million subscribers this year.
This shows that Sirius has been doing well despite the aggressive moves from Liberty Media (LMCA). Liberty has been attempting to gain majority control of Sirius, and it already owns 46.2% of Sirius shares. It already has five of thirteen board seats as well, and it wishes to eventually gain the majority of these positions. The recent success will help Sirius fight off Liberty's aggressive moves, but investors should continue to monitor this situation to see how things may potentially change in the future.
As a result of all its good news, Sirius has increased its revenue target from $3.3 billion to $3.4 billion, which is higher than the analysts' estimated $3.36 billion. It has already experienced great success in 2012, as its first-quarter earnings rose by 38% from the previous year. Sirius has announced a price increase, but this has not kept analysts from being optimistic, as expectations remain high for the company. Sirius is in a better position than it previously expected, and this is a good time to get involved with it.
Some have pointed to strong auto sales and the company's ability to minimize cancellations as major factors for the strong numbers from Sirius.
While consumers have not been confident in the economy, auto companies reported strong June sales numbers. For example, General Motors (GM) reported June sales up 15.5% from last year, and Ford (F) reported a 7% increase from last year. There are some that expect auto sales to slow a little for the remainder of the year, but they are still expected to be strong in general. Sirius depends largely on the auto industry for new subscribers, so the continued strength of the industry is a major boon to Sirius.
The increased auto sales are not only beneficial for Sirius, however, as its competitors have also been attempting to gain a share of this market. Since early last year, Pandora has been making deals with auto companies like Ford and General Motors. This means that Pandora should also be in a good position to make gains with the success of the auto industry. Spotify has recently entered the mobile web-radio market, meaning Apple should also benefit from these improvements in the auto industry, as it has multiple devices that allow users to play Spotify in the car. As Sirius is still more closely connected to the auto industry, however, it still has the most to gain from the strong auto sales. Despite the stronger competition, Sirius continues to maintain a privileged position in this industry.
Google is even attempting to gain a place in the auto radio market, as the new Adayo double-din car radio runs on Android 2.2. At the steep price of $650, however, I doubt that this product will take off. Google will likely continue to benefit slightly from the auto industry due to its smartphones and tablets that can be used to play music in the car. As is the case with Apple though, this will be minor. While Google may benefit from this, therefore, it is only in a subtle way that will not have a noticeable impact on the stock.
While many companies are attempting to make gains in the auto music industry, Sirius has already established a strong presence. At the moment, it seems that it will continue to thrive, although alternatives like smartphones, tablets, Pandora, and Spotify may win out in the long term. Companies like Pandora, Apple, and Google, however, are not set to make major gains from this news for the time being. While I do recommend Sirius stock at the moment with the strong auto industry, investors should watch to find what the company does to maintain its dominant position in the market. Investors should also keep a close eye on the auto industry to be sure that it maintains strength throughout the rest of the year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.