Updated Research Report on Sirius XM - Analyst Blog

On Apr 3, 2014, we issued an updated research report on Sirius XM Holdings Inc. SIRI. The company continues to generate strong revenues, record EBITDA and higher ARPU growth mainly attributable to a robust telematics market in the U.S.

SIRIUS XM has delivered no earnings surprise in the four quarters last year, with an average beat of 0.00%. The company reported mixed financial results for the fourth quarter of fiscal 2013 with the bottom line missing the Zacks Consensus Estimate but the top line beating the same.

SIRIUS XM owns an extensive satellite network, covering the whole of the U.S. that provides audio content through more than 170 channels. SIRIUS XM broadcasts music, sports, news, talk, entertainment, traffic and weather news in the U.S. and Canada for a subscription fee through its proprietary satellite radio systems — the SIRIUS system and the XM system. Continuous launch of innovative services coupled with its future share repurchase plan are likely to act as tailwinds for the company while moving ahead.

SIRIUS XM is set to diversify its business model from a pure radio entertainment provider to a web-based safety and navigation information provider for cars. The company has strong telematics partnership with almost all major car manufacturers including Acura, BMW, Honda, Hyundai, Infiniti, Lexus, Nissan and Toyota. SIRIUS XM believes that new cars sold with satellite radio should reach 11 million in 2014 as against 10.7 million last year. The sale figure is expected to double in the next five years. As a result, SIRIUS XM remains highly optimistic about achieving nearly $100 million in fiscal 2014 from its connected vehicle service business. Moreover, the acquisition of the connected vehicle services division of Agero is expected to be a long-term positive for the company.

On the downside, SIRIUS XM is largely dependent on the future of the U.S. auto industry, which at present is poised for strong growth. Therefore, even a minor fluctuation in auto sales may significantly affect the company's financials. Moreover, a highly leveraged balance sheet coupled with stiff competition from other Internet music service providers will continue to act as headwinds for the company going forward.

SIRIUS XM currently carries a Zacks Rank #3 (Hold).


Stocks That Warrant a Look

Other better-ranked stocks worth considering in this sector include AMC Networks Inc. AMCX, Entravision Communications Corporation EVC and Starz STRZA. All three stocks currently carry a Zacks Rank #2 (Buy).