Sirius XM (SIRI) has seen its share of critics this year, ranging from wild speculation that the company will actually post net subscriber losses, to crazy ideas that Pandora (P) or Apple (AAPL) will somehow snuff out the company with competing services such as "free" Internet radio or the popular iTunes service through individuals' phones.
The critics have been, and will continue to be, wrong.
The fact of the matter is that Sirius XM has blown out original subscriber guidance for 2012, pulling in over 1 million subscribers in the first half of the year alone, and with current guidance at 1.6 million, there's little doubt that this will be soundly beaten by the end of the year. Strong auto sales have laid a strong foundation for this increase, along with ramped up customer retention efforts keeping churn at a stable 1.9% despite a modest price increase for the service as it has gradually rolled out through the customer base.
Fear, gloom, doom... "what happens when Liberty Media (LMCA) stops buying?" Save it for Halloween to scare the children. The adults aren't buying it, they're buying Sirius XM, and it shows. Sirius XM is currently testing multi year highs trading at $2.67 as this is written, a price point it has not seen in 5 years.
Considerable upside still remains, in my opinion, and I would not be surprised to see $3 per share by year's end or even in short order. The stock looks ready to run.
As Spencer Osborne laid out in his recent article, auto sales for October are coming in strong, and have set the stage for Sirius XM to increase subscriber guidance for 2012. Unless you think things will stop there, I believe that it's safe to say auto sales will continue at the strong pace already seen for the first 9 months of the year, and end 2012 with a banner year for total sales, and thus a banner year for Sirius XM subscriber additions.
Those subscribers mean money, to put it simply, and Bank of America-Merrill Lynch seems to agree, initiating coverage of Sirius XM and placing it immediately at a "buy."
It's very easy to get caught up in the questions surrounding Liberty Media's pursuit of control of Sirius XM, and the fact that it currently sits a mere 0.4% away from that control. But as I have touted from the beginning of the year, investors should tailor their concerns for the most part towards how Sirius XM is doing on its own. The Liberty situation provides for wonderful speculation, engaging discussion, and a chance for every armchair critic on the planet to weigh in on how they think things will go, but investors should never lose sight of the fact that Sirius XM is performing quite well despite all the surrounding noise.
The pennies may be made or lost over the Liberty "battle" but the dollars will be made on Sirius XM itself. As an investor, my dollars are placed comfortably with Sirius XM.
Disclosure: I am long SIRI.