By Neal Rau
Sirius XM Radio Inc (NASDAQ:SIRI) shares have doubled over the past two years, as the company has benefited from very strong auto industry sales. The stock has fallen about 12% from the 52-week highs made in last October, which capped a four-month run-up of over 30%. Traders who bought the dips in SIRI over the past few years have been rewarded, as every dip has been a buying opportunity, so is this just another buying opportunity for SIRI?
Sirius posted its Q3 numbers on October 24, which showed subscriber revenue increased 10% year over year. During the first nine months of the year, subscriber revenue increased 11%. For the full year, Sirius expects total net subscriber additions of approximately 1.6 million, up from the previously expected 1.5 million.
The company missed analyst estimates, only earning $0.01 versus the $0.02. The stock made the yearly highs a few days before the earnings report in late October but shares have been sliding lower since. Based on the SIRI real-time trading report published by Stock Traders Daily, the stock is near a test of longer-term resistance. This article will discuss our strategy going forward based on this report.
Sirius has over 25 million subscribers and sales were $3.4 billion in 2012 and expected to be almost $3.8 billion in 2013. The company does compete with Pandora Media Inc (NYSE:P) and Apple Inc. (NASDAQ:AAPL), but its dominance in auto related businesses gives the company a unique platform to build upon.
The auto industry deals remain strong for Sirius next year. Chrysler announced that all Chrysler, Jeep, Dodge, Ram, SRT, Fiat, and Mopar customers will receive a one-year SiriusXM subscription when purchasing any 2014 model year vehicle with a satellite radio-equipped Uconnect System. The one-year SiriusXM subscription includes every premium channel available on their satellite radio, plus access to SiriusXM Internet Radio.
Sirius and Honda Motor Co Ltd (ADR) (NYSE:HMC) have extended their relationship to January 2020, significantly increasing the penetration of Sirius XM factory-installed technology in new Honda and Acura vehicles. Starting in 2014, Honda will steadily increase the penetration of Sirius XM across its entire vehicle lineup.
Based on growth in new automobile sales and an increasing number of existing self-pay subscribers selling their cars and rotating back into the trial funnel, the company increased its guidance for net subscriber additions. Sirius also increased introduced new guidance for continued growth in 2014 in both revenue and adjusted EBITDA.
Sirius took a step toward diversifying within the auto industry when it acquired Agero for $530,000. Agero offers two-way wireless connectivity in safety, security, convenience, maintenance, data services, and vehicle diagnostics. Sirius can leverage its dominant position in the radio and vehicle industry to break into the internet connected car market. Telematics systems for navigation and entertainment, as well as communicating things like speed and gas mileage to drivers via the dashboard have a big future in the coming years.
However, Sirius will need to develop the infrastructure quickly, as the company's radio services are now facing competition from portable devices capable of connecting to vehicles with the internet, which could hinder the company's ability to attract new customers and retain current subscribers.
In the end price is what makes us money, but based on the Stock Traders Daily real-time trading report, SIRI is testing long-term support, and according to the rules that govern our strategies, we are buyers near support. If support holds, we would expect shares to move higher and eventually test resistance. By definition we prefer to buy near support levels when they are tested because that allows us to maximize our return, our target is resistance, and we want to get the complete oscillation from support to resistance, but it also helps us control risk and determine our stop-loss.
Stock Traders Daily has been providing comprehensive market analysis, and correlated trading strategies since January 2000, which was the virtual peak of the Internet Bubble. Our objective is to provide strategies capable of making money in any market environment, and we have been doing that since inception.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: By Neal Rau for Stock Traders Daily and neither receives compensation for writing this article from the publicly traded companies listed herein.