SIRIUS Lifts Outlook on More Users

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Significant customer additions during second quarter of fiscal 2012 have induced satellite radio operator SIRIUS XM Radio Inc. (SIRI) to raise its revenue and subscriber guidance for the full year.

SIRIUS XM gained 622,042 subscribers during the quarter, reflecting an increase of 38% on a year-over-year basis. During the first half of 2012, the company added 1,026,638 subscribers compared with a total addition of 825,211 subscribers in the comparable period of 2011. The company has set a target of adding 1.6 million customers during fiscal 2012, of which it has already achieved nearly 64.4% by the end of first half of 2012.

We believe that the significant subscriber growth was mainly attributable to the launch of SIRIUS XM 2.0 product suite, expansion of channel line ups (inclusive of Latin channels)and higher auto sales. Moreover, easy availability of internet radio applications on Google Inc.’s (GOOG) android-based phones and Apple Inc.’s (AAPL) devices has further triggered subscriber growth.

In December last year, SIRIUS XM launched the advanced version SIRIUS XM 2.0 called “Lynx”. Lynx is touted as the next-generation satellite receiver that allows subscribers to stream content to home audio systems via Bluetooth. It also features high-resolution touch screen support and allows 200 hours of music storage, hence providing more options to the users to access their favorite music anytime and from anywhere.

On the back of such innovative product launch, coupled with better management execution, SIRIUS XM remains confident of expanding its subscriber base by 1.6 million during 2012, up from the previous guidance of 1.5 million. The company also raised its revenue forecast for the year to $3.4 billion from the prior $3.3 billion.

Currently, SIRIUS XM has a Zacks #3 Rank, implying a short-term Hold rating on the stock. We are also maintaining our long-term Neutral recommendation on the company’s shares.

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