On July 8, Zacks Investment Research upgraded Sirius XM Holdings Inc. (SIRI) by a notch to a Zacks Rank #2 (Buy) based on the company’s back-to-back deals with automobile manufacturers, Ford Motor Co. (F) and Chrysler Group.
Why the Upgrade?
Last month, Sirius XM sealed deals with Ford Motor and Chrysler Group, on June 19 and 25, respectively. Per the deals, the company will provide Ford's and Chrysler's customers with a complimentary five-year subscription to its navigation packages, SiriusXM Traffic and SiriusXM Travel Link.
Once implemented, customers of both the companies will be able to receive vital information like traffic conditions, fuel price, movie listings, sports scores and weather information through satellite from SiriusXM. We believe Sirius XM’s decision to tie up with Ford and Chrysler Group will boost the company’s top line considerably and serve as a long-term growth driver.
Over the past one year, Sirius XM’s radio penetration has increased only 3% due to lower-than-expected auto sales numbers. Thus, the company is making serious efforts to increase its radio penetration in new automobile models.
Notably, the company holds strong telematics partnerships with almost all major car manufacturers including Acura, BMW, Honda, Hyundai, Infiniti, Lexus, Nissan and Toyota.
With the market for new cars having already reached a saturation point, Sirius XM now foresees untapped potential in the second hand car market. Sirius XM has more than 12,000 dealers who have provided the company with vehicles sales information. The company is expecting to cover more than 4 million second hand cars in 2014 backed by a rising number of dealers.
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Zacks Investment Research
- Consumer Discretionary
- Sectors & Industries
- Chrysler Group
- Sirius XM
- Ford Motor Co.