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SiriusXM (SIRI) Beats Subscriber Growth Expectations in 2018

Zacks Equity Research

SiriusXM Holdings SIRI added 1.4 million self-pay subscribers in 2018 to hit a user base of 28.9 million, which beat its initial guidance by approximately 40%. Per the guidance provided at the end of the third quarter, the company had anticipated to add almost 1.275 million self-pay net subscribers.

Moreover, the company added almost 1.3 million net subscribers and had 34 million paid subscribers at the end of the year.

SiriusXM also expects to meet or exceed its 2018 guidance for revenues, adjusted EBITDA and free cash flow. Notably, revenues are expected to be approximately $5.73 billion, while adjusted EBITDA to be roughly $2.2 billion. Free cash flow is expected to be around $1.5 billion.

The company also stated that, in the fourth quarter, it bought back shares worth almost $646 million. SiriusXM returned approximately $1.5 billion of capital to its stockholders, including dividends, in 2018.

Further, SiriusXM provided initial 2019 guidance. The company expects to add almost 1 million self-pay net subscribers. Total revenues are anticipated to be approximately $6.1 billion, while adjusted EBITDA to be roughly $2.3 billion. Free cash flow is expected to be around $1.6 billion.

Sirius XM Holdings Inc. Revenue (TTM)

Sirius XM Holdings Inc. Revenue (TTM) | Sirius XM Holdings Inc. Quote


Notably, the guidance doesn’t include the Pandora acquisition that is expected to conclude in the first quarter. The company is set to release the fourth quarter and 2018 results on Jan 30, 2019.

Strong Content Lineup & Expanding Partner Base Aid Growth

SiriusXM's focus on strengthening its content portfolio is aiding subscriber growth. Throughout 2018, the company added content from talk shows and sports, apart from music, to boost user engagement.

In order to expand its footprint beyond vehicles, SiriusXM has partnered with Amazon AMZN to provide three-month trials to some of its subscription packages to customers buying Echo Dot smart speakers on the e-commerce retailer’s website.

Moreover, partnership with automobile OEMs is a key catalyst. The company’s penetration into the connected vehicle services business with OEMs like Nissan, Fiat Chrysler and Toyota has been increasing due to the partnerships. Moreover, the company extended agreements with OEMs like Audi, Mazda, Land Rover, Mercedes-Benz, Jaguar and Volvo in 2018.

SiriusXM is now looking to provide real-time vehicle services to its users. The company along with Visa V recently announced a plan to introduce an in-vehicle payment solution.

Further, the Pandora acquisition provides significant growth opportunity to the company. Notably, Pandora has a huge user base of 71.4 million monthly active users (MAUs). The combined entity is estimated to report pro-forma revenues of more than $7 billion for 2018.

Zacks Rank & A Key Pick

SiriusXM currently has a Zacks Rank #3 (Hold).

Townsquare Media TSQ is a stock worth considering in the same industry as it flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Expected long-term earnings growth rate for Townsquare is 12%.


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