Well, we are at mid-month and it is time to start preparing for the potential news in auto sales that should be coming out only a couple of weeks from now. Why look at this issue now? Because it makes perfect sense to do so. Why let the auto market news, which Sirius XM Radio Inc. (SIRI) is sensitive to, take you by surprise in early September when you can begin to prepare for the news today!
According to Edmunds, and my regular sources inside the auto sector, the sales so far in August look promissing. While there is certainly time left in the month for a shift, the early indications are that August could fare better than July, and there is a potential that the SAAR could even come in slightly higher than July.
"The current pacing points to retail sales ending up around 1.04m, which equates to a SAAR of 11.7m. (Last month we saw 991,000 retail sales and a SAR of 12.0m.) If we assume the usual jump in fleet sales for August, we should end up with total sales of 1.26m and a SAAR of 14.2m. (Compared with sales of 1.15 and a SAAR of 14.1 last month.)" - Edmunds
Of course, the raw numbers are what matter, but paying attention to SAAR is important as well because it is the industry standard that everyone gauges performance by. It appears that retail sales will be slightly higher than last month, and that Fleet sales will deliver a bump to the overall numbers. All in all, Edmunds is looking at 1,260,000 cars to sell. I currently have my model at 1.23 million. Either way, the sales are well above the 1.0 to 1.1 million we like to see for Sirius XM to report good numbers.
Toss in an ever growing used car segment and it is possible that Sirius XM could be building up to another impressive subscriber quarter that will necessitate raising guidance for the year.
An interesting note in the Edmunds piece is that GM will see a substantial jump in sales due to a big advertising campaign during the Olympics. GM supplies subscribers based on sales as they happen, so a boost here could have a very positive impact on the Q3 subscriber number.
In fact, I am predicting here and now that Sirius XM will not be able to wait until the Q3 conference call to raise subscriber guidance and will do it in the next three weeks. Look for that guidance to be 1.8 million, leaving room for yet another positive development in Q3.
Expect the auto sales headlines to be positive and that will help bolster Sirius XM's share price. Look for Sirius XM to raise subscriber guidance sooner rather than later, providing another catalyst. Investors may want to consider adding on any drifting or weakness because there is positive news around the corner...At least that is the indication now.
Disclosure: I am long SIRI.