The following commentary comes from an independent investor or market observer as part of TheStreet’s guest contributor program, which is separate from the company’s news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.
NEW YORK (Trefis) -- Sirius XM (SIRI) is reporting its fourth quarter and full year 2011 results on Feb. 9, this upcoming Thursday before the open. It will be interesting to see how subscription acquisition costs have trended as Sirius has added subscribers and the outlook the company provides for the next quarter. The fourth-quarter results are likely to be pleasant for investors and outlook could be mixed. Sirius XM's growth is primarily hinged on sales of new vehicles from companies such as GM (GM) and Ford (F), although the channel of pre-owned vehicles is becoming increasingly important.
----------------------------------------------------------
More From Stockpickr
----------------------------------------------------------
Our price estimate for Sirius XM stands at $2.18, implying less than a 5% premium to the current market price.
Subscriber Guidance Beat
Sirius XM has already reported that it had a record fourth quarter in terms of net subscriber additions. The satellite radio service provider added about 540,000 net subscribers in the quarter, taking its total to about 21.9 million subscribers by end of 2011. This implies that the company added about 1.7 million subscribers for 2011, registering growth of close to 20% over 2010 in terms of net subscriber additions. This will come as no surprise to the investors as this has already been announced.
Look for Customer Acquisition Costs
Since the vehicle sales in the U.S. did not jump as much as could be implied by Sirius XM's fourth-quarter 2011 net subscriber additions, it could imply that the company has improved its conversion rate and pushed more into pre-owned vehicle segment. We expect that this recent push and higher conversion rate could have been a result of increased promotional offers which can weigh slightly on Sirius XM's subscriber acquisition costs.
Market Will Watch Outlook
It will be critical to watch the outlook that Sirius XM provides. While GM and Ford appear to be optimistic about vehicle sales in 2012, Sirius XM's price increases could be a slight deterrent. In our opinion the company could provide a positive outlook for 2012 as well, in-line with what it saw in 2011. The price increases were communicated well in advance and that has not stopped more subscribers from subscribing in the fourth quarter. We believe that the improved auto sales outlook and Sirius XM's continued expansion in the used vehicle segment will more than offset any negative impact of price rises. We expect another good year for the company.
Click here to find out how a company’s products impact its stock price at Trefis
Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.
