Can Car Sales Drive Sirius XM Growth?

Sirius XM Radio Inc. (NASDAQ:SIRI) is optimistic about the future of satellite radio, with more growth predicted for the remainder of the year.

Sirius XM has grown more than expected, and estimates the trend will continue. Chief Executive Officer James Meyer spoke at the annual shareholders’ meeting Tuesday. Meyer gave some optimistic estimates about the company’s future, although he also gave a disclaimer about a number of factors that could inhibit Sirius XM’s growth, including increased competition, reliance on auto makers, and increasing royalties for music rights.

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New car sales make up much of Sirius XM’s growth. In 2012 67 percent of cars sold had satellite radio, and the prediction about higher amounts of subscribers corresponds to expected car sales. Sirius scoops up new customers by offering a free trial period of satellite radio with new cars, hoping to hook users with their unique and ad-free content. Sirius used projections of new car sales to estimate its growth. Sirius XM estimates that its satellite radio service will be used in 100 million vehicles by 2018.

Sirius XM isn’t worried about competition from Pandora Media Inc. (NYSE:P) and other terrestrial radio services. Sirius XM had $142.34 in revenue per subscriber in 2012, while active Pandora users only brought in $6.51 each. Pandora is a free service that is inhibited by advertisements, while Sirius is ad-free but costs around $20 a month depending on the package. Some analysts believe that the success of one company spells the end of the other, but whether that has to be the case remains to be seen. As of now, both companies have been able to grow despite targeting the same audience.

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Sirius XM ended 2012 with 23.9 million users, and expects to have 25.3 million by the end of the year. Analysts are feeling good about Sirius, with many top organizations rating the stock as a buy.

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