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Sirius XM (SIRI) Bulls began celebrating before the Q3 earnings were even announced last week. The stock shot up to a 52 week high of $2.97 October 18th in anticipation of exceptional earnings results. And rumors of an even more spectacular 4th quarter began to emerge:

Nov 5, 20122.902.902.822.8356,459,6002.83
Nov 2, 20122.852.942.842.9068,383,8002.90
Nov 1, 20122.812.962.812.81125,953,7002.81
Oct 31, 20122.842.842.742.8060,609,3002.80
Oct 26, 20122.852.892.812.8273,249,0002.82
Oct 25, 20122.922.922.792.85101,749,1002.85
Oct 24, 20122.852.932.842.8982,782,3002.89
Oct 23, 20122.882.882.802.8747,497,7002.87
Oct 22, 20122.942.952.852.9173,920,8002.91
Oct 19, 20122.952.972.882.92137,909,8002.92
Oct 18, 20122.842.972.822.94174,315,4002.94
Oct 17, 20122.862.862.802.8462,054,1002.84

Some of the Sirius Bears thought that my last article about the upcoming fourth quarter was pure speculation, even though it was based on the predictions of 14 analysts. However, now that the third quarter results have been announced, it is very easy to subtract the actual results of the last nine months from the 2012 Guidance to get a closer, more accurate look at Q4.

Chart forSIRIUS XM Radio Inc.

First and foremost (in any analysis of Sirius XM) is the number of net subscriptions that will be added in the fourth quarter. Considering that 1.5 million subs were added over the first three quarters, and that the 2012 guidance is 1.8 million, Sirius should add 300 thousand more to just make guidance. However, over the last nine months the net additions have grown 27% over last year. The net subs added for Q4 of 2011 were 540 thousand, and 1.7 million for the entire year.

If the fourth quarter of 2012 beats last year by 27% like the previous 3 quarters have done, the net sub additions would be 685 thousand, or 2.2 million for the year. This number would be considered total speculation even though it is based on the same net sub growth Sirius has experienced already throughout the year. However, as far as I can tell, there is nothing going on right now that would stop that rate of growth.

Sirius XM CEO Mel Karmazin remarked on the Third Quarter Conference Call that Hurricane Sandy could have a negative impact on new car sales, which would negatively affect the sub count for Q4. That is obviously possible, however I think that most consumers that were planning on buying a car in this quarter would still buy that car albeit several weeks later depending on where they live in relation to the areas where Sandy caused the most damage. According to Forbes the sales would probably just be deferred. And they would be offset by the sales caused by consumers replacing damaged cars. More than half a million cars were destroyed by Hurricane Katrina. One of my readers brought up this brilliant scenario in the comment section of my last article mentioned above:

DSandman999 Comments (413)

Howdy LA -
I mentioned in another thread that I could not help but see all those damaged cars needing to be replaced and repaired. How about a spike in Subs in 4Qtr because of both the replacement new cars likely getting a paid 3 month sub as well as a lot of used cars (with just a little minor water damage) having Siri radios for the used car program spikes?

Most of those cars that need to be replaced will be paid for by insurance claims. Because of this, I think the fourth quarter subs could actually beat last year. This would send revenue even higher. Mr. Karmazin reported:

We were able to drive revenue higher by 14% to $867 million, the largest quarterly revenue number in the history of satellite radio. This is an acceleration from 11% revenue growth in the first quarter and 13% revenue growth in the second quarter. Subscriber growth remains the key focus of our efforts to grow the business, and the price increase we implemented on January 1 is also benefiting revenue growth.

Based on the guidance from Sirius, the company expects the revenue to be $3.4 billion for 2012. The revenue for Q1 was $805 million, and Q2 was $838 million, for a total of $1.64 billion. This leaves $1.76 billion left for Q3 and Q4. Considering revenue was $867 million for Q3, the 4th quarter revenue will be at least $893 million. But keep in mind that this number is based on Q4 subs of only 300 thousand. Here are the latest analyst's revised estimates:

Earnings EstCurrent Qtr.
Dec 12
Next Qtr.
Mar 13
Current Year
Dec 12
Next Year
Dec 13
Avg. Estimate0.030.020.540.10
No. of Analysts13.006.0010.0013.00
Low Estimate0.020.020.530.06
High Estimate0.040.030.570.13
Year Ago EPS0.010.020.070.54
 
Revenue EstCurrent Qtr.
Dec 12
Next Qtr.
Mar 13
Current Year
Dec 12
Next Year
Dec 13
Avg. Estimate895.48M904.42M3.41B3.81B
No. of Analysts1261515
Low Estimate886.09M889.26M3.40B3.70B
High Estimate908.00M916.00M3.43B3.90B
Year Ago Sales783.74M804.72M3.01B3.41B
Sales Growth (year/est)14.30%12.40%13.10%11.80%

Based on average revenue of $895 million the earnings are predicted to be three cents a share, which is triple last year. And that was my prediction in the last article. However, if there is a major bump in subs due to the replacement of storm damaged cars, four cents a share is now very possible.

Even though the price of Sirius stock seems "high", it will not stay this "low" for long. Each time the earnings are revised upward, the stock is going to jump. But, I think there will be a dip in the whole market on Wednesday regardless of who wins the election.

This is because the polls show the race to be almost split 50/50. There is no way of knowing if investors are split equally, but there is a lot of big money representing both sides. The investors that are on the losing side will think the economy will surely collapse with the "opponent" in control of the Oval office. This gloom and doom usually does not last very long, but it does offer a buying opportunity during the dip. Since Sirius shares dropped Monday, this could be the beginning of the dip which may continue on Tuesday due to jitters caused by the uncertainty. So if you want to start a position, or add to your current shares, this will be the best time.

Source: Sirius XM: Net Subscribers Could Jump Even Higher In Q4

Additional disclosure: I may buy Sirius XM stock in the next 72 hours.