Value Line recently initiated coverage of Sirius XM Radio, Inc. (SIRI) in its flagship product, The Value Line Investment Survey. Headquartered in New York City, the company is the only major satellite radio broadcaster with operations in the United States and Canada. In the year ended December 31, 2012, it saw business improve considerably in each of its revenue streams – subscriptions, advertising, and equipment. The company employs nearly 1,600 full-time workers.
The company is the result of a 2008 merger between the two halves of its namesake, Sirius and XM. The Sirius brand, in its nascent form, was devised in the early 1990s, when Martin Rothblatt founded Satellite CD Radio in Washington, DC. The company became the first to petition the FCC for unused satellite frequencies. After years of lobbying, the company launched three satellites into orbit in 2000. XM was in its early stages around the same time Sirius was, existing as an operating unit of the American Mobile Satellite Corporation (AMSC), a consortium of various companies and organizations united to create a satellite telecommunications industry. In 1998, it was spun off as XM Satellite Radio Holdings.
After finalizing a long-gestating merger, the company as it is currently known was formed. With about 24 million subscribers in North America, Sirius XM is the only company of its kind. It produces a wide array of original content through its talk radio lineup, as well as hundreds of options for commercial-free music channels organized by genre, decade, and artist. With channels hosted by BBC World News, NPR, Fox News, and many more, the news and information services offered are unique and unmatched. The company also provides continuous traffic reports for 22 metropolitan markets in the United States.
A customer-friendly slate of subscription packages has helped boost the company’s exposure in recent years. It’s “Premier” subscription is a sort of primer for new subscribers, featuring the Oprah Network and radio legends Opie and Anthony, among many other programs. Geared towards casual and niche audiences alike, subscribers can access satellite radio through radio devices and phones, as well as its online platform.
After years of struggle and a near-bankruptcy after the merger, a time in which satellite radio as a whole began to seem little more than a flash in the pan; the company was saved by a well-timed loan from now-majority shareholder Liberty Media (LMCA). Since then, SiriusXM has emerged as a profitable and viable option for media consumption. And while the proliferation of alternative online platforms, including music streaming services like Pandora Media (P) and Spotify, continue to pose a real challenge to the company, Sirius has established enough of a market share to contend well into the future. Deals with major automakers – from BMW to Volkswagen, General Motors (GM) to Toyota (TM) – augur well for the company during a time when car sales are on the rise.
Still, despite its wide range of programming and flexible platform accessibility, the company is barely posting a profit. For the year ahead, we look for the company to achieve between $0.05 and $0.10 per share on the bottom line, with gradual improvement occurring over the next few years. So, while the singularity of its product might lend itself to long-term viability, the aforementioned competing technologies are more affordable, offer free options with commercials, and can be more convenient.
Subscribers interested in this large-cap satellite radio pioneer are advised to consult Value Line’s quarterly reports for Sirius XM Radio, Inc. as well as any supplemental reports and relevant articles as important news items arise.
At the time this article was written, the author did not have positions in any of the companies mentioned.