Sirius XM Radio Inc. (SIRI) has just brilliantly executed what I would call a "soft launch" of its new On Demand 2.2.0 App for internet radio. It is now available on the computer, select smartphones, and Apple devices according to the Sirius website. I am calling it a soft launch because it has just been added to the company's website, but there is not a press release yet.
I just downloaded it, and I will have to agree with the chatter on the web: It is awesome. I am calling it brilliant because this is perfect timing for the upcoming conference call on Tuesday. There is a recording on the App that walks you through the directions on how to use it. But I expect either a press release, or more news at the CC. The big reason for a soft launch is to smooth out any technical kinks:
Early reviews on the App Store seem to be singing praises with comments like "this proves Sirius is finally listening" and "they finally got the mobile app right!" Sadly, a few others are reporting they can't even connect because of network errors. All I can say is, there is no network error here.
In other Sirius news, actual car sales for July were just released, and as was predicted by TrueCar, this was the best July since 2007. Although cars will not have the On Demand feature, the company still considers this its bread and butter. The more cars that are sold, the more subs Sirius will add to its huge growing numbers. To understand the importance of this, these July numbers keep the company on track to pass the current guidance of 1.6 million net sub adds for 2012. Some analysts think that number could reach two million subs - which might add as much as $100 million to the gross revenue for the year.
But you have to continue to do your due diligence to get to the truth about the Sirius XM numbers. For instance, this was taken from an article titled "Car Sales Stall Out in July":
Adam Jonas, auto analyst with Morgan Stanley, said his firm's checks with dealers showed "lukewarm floor traffic at best," with consumers becoming more reluctant to buy, despite larger cash-back offers and other promotions.
He still is sticking with his forecast of U.S. auto sales of 14.4 million this year, which would represent a 12.7% jump from last year's total. But Jonas cautioned "we need to start seeing stronger numbers in earnest in August and September to make good on this forecast."
Overall U.S. auto sales have been strong this year, rising 14.8% through June, the best first half of a year since 2008, even as the broader U.S. economic growth has remained sluggish.
July sales rose 8.9% from a year ago, according to sales tracker Autodata.
That's the weakest sales rate of the year and a bit short of the forecasts of a 10.1% gain in sales. Still, it was the best July for the industry since 2007. Last year's July sales pace was 12.7 million.
When reading that article you come away with a sense of "Gloom and Doom" for the July numbers. And the fact that this was the best July since 2007 is buried near the bottom. It would be easy to miss, since it was right after the sentence saying it was the weakest sales rate of the year. It is really hard for me to consider the July sales to be "stalled out", when this was the best July since 2007.
As you can see from the chart below, Sirius does trend with the major auto companies like Ford (F), General Motors (GM) and Honda (HMC) to name a few. However, sometimes they will split, like the auto dip that started in April and has continued on a downward spiral without Sirius. As I have pointed out in other articles, this is due to international fears concerning the car manufacturers - that do not affect Sirius. Even though there have been those who would like to take it global, it is just in North America right now.
The reason that Sirius jumped up on the chart was the announcement of the 622,000 net sub additions for Q2 on July 9. And now these numbers will not only be boosted by the car sales, but a lot of completely different listeners will be attracted to the On Demand feature of the internet subscriptions.
Also notice the dramatic drop in volume since the middle of May. Personally, I think this is due to investors holding, rather than trading, in anticipation of a sudden up-swing in share price. As I have said in the past, this lower volume could cause a big problem for shorts who need to cover if the price does suddenly take off. Sirius XM shareholders seem to be holding in anticipation of what Mel will have to say next week. And this new On Demand feature should have him gloating.
On the Tuesday CC, Sirius will announce its Q2 earnings. And the negative headlines are already starting. Articles that show that Sirius earnings are projected to be down 33% from last year are everywhere suddenly. That is true, they are projected to be down, but not because the company is performing worse than it did last year. As a matter of fact, it is booming, with all of those new subs for Q2 up 38% over last year. The author in the link above (unlike the others), did include the reason for the expected drop, in spite of his negative headline:
Sirius XM Radio makes the cut in this weekly list, but it should probably come with an asterisk. Nearly half of the $173.3 million profit it scored a year earlier was the result of a one-time pop in investment income from cash it received in completing the acquisition of its Canadian partner.
So even though the company should have excellent results reported on the Tuesday conference call, it will probably show earnings down 33% at two cents a share, rather than the three cents from last year. I actually think this conference call will be one of the best ones that Sirius has ever had. As a matter of fact, in the last two weeks, several analysts have upgraded Sirius, including Maxim which reiterated its buy rating on Sirius yesterday:
Maxim Group reiterated its buy rating on Sirius XM Radio shares in a report released Friday. SIRI has been the subject of several other recent research reports. ISI Group analysts initiated coverage on Sirius XM Radio shares in a research note sent to investors on Thursday, July 19th. They gave the stock a buy rating. Separately, analysts at Zacks upgraded Sirius XM Radio shares from neutral to outperform in a research note to investors on Tuesday, July 17th. The firm now has a $2.50 price target on the stock. Barclays Capital's analysts upgraded Sirius XM Radio shares from underweight to equalweight in a research note to investors on Monday, July 16th.
So Sirius longs can gloat with Mel on Tuesday. Just the news of the On Demand feature being added should add at least ten cents to the share price. And there is probably going to be more good news that we don't know about yet. It is funny that everyone knew this feature was coming, but for some reason investors have to see it working before they invest. Well at least mine is working!
Disclosure: I am long SIRI.