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Will Weakness In U.S. Auto Sales Be A Headwind For Sirius XM?

Sirius XM Radio Inc. NASDAQ:SIRI - Will Weakness In U.S. Auto Sales Be A Headwind For Sirius XM?

According to the numbers released by Autodata on September 1, light vehicle units declined 4.2 percent in August, while the 2016 SAAR tracked at 16.98 million, as compared to 17.88 million in July.

Wunderlich’s Matthew Harrigan maintains a Buy rating on Sirius XM Holdings Inc. SIRI 0.48%, with a price target of $5.

Auto Sales

“We now conservatively assume that light vehicle sales even in 2020 are only 17.5mm (flat vs. 2015), while continuing to emphasize result and valuation sensitivity to overall sub additions and pricing,” Harrigan mentioned.

The analyst expects the used market to offset the headwind from the plateauing of the new car sales, as well as the need to replace churn against a higher installed base.

Valuation Prices Additions

Harrigan believes that SiriusXM’s stock valuation prices for net annual additions of 1.2 million through 2020 with 1.8 percent annual ARPU growth.

The analyst expects annual additions of 1.4 million with annual blended pricing realization of 2.1 percent across the company’s segments.

Well Positioned

According to the Wunderlich report, “SiriusXM remains well positioned for the increasing primacy of entertainment within the car, conceptually even with the gradual advent of autonomous vehicles. This is attributable to the new 360L user log-in ability across vehicles and improved apps that allow access to SIRI's best-in-class sports, talk, and music content.”

Harrigan believes management now has meaningful technology and resources dedicated to connectivity and streaming, led by EVP Jim Cady.

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DateFirmActionFromTo
Aug 2016CitigroupMaintainsBuy
Jul 2016Telsey Advisory GroupInitiates Coverage onMarket Perform
Jan 2016MacquarieMaintainsOutperform

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