It’s a big opportunity for the company for an additional revenue stream, with Nissan selling around 1 million cars annually. If the company capitalizes on this opportunity well, it will help it secure a dominant position in the automobile segment and also enhance its top-line growth in the long-term. Even though there is intense competition in this area, the company’s deal with Nissan clearly shows its bright prospects. I expect more of such deals to be announced in the future.
Beating the heat of the competition
Last month, Pandora Media Inc (NYSE:P) reported its fourth quarter results for 2013, posting an increase of 54% in the revenue. This was mainly supported by the subscription revenue, which increased 74% to $16.1 million on an yearly basis. Following results, the stock is trading up around 15%, with a total return of 42% since the beginning of 2013.
Just after six years of its launch in the U.S., Pandora Media Inc (NYSE:P) has achieved a milestone of 200 million users. This is because of the fact that it has an upper hand in offering personalized radio services on smartphones and other devices. I believe this robust performance can put a dent on Sirius’ performance in the future.
To ward off this competition, Sirius is working towards shifting to the internet as its medium, and to promote its online streaming app. This will further help the company broaden its user base and compete against the internet-based competitors. The company will provide complete integration between internet radio and satellite radio, beginning from the 2014 models of General Motors, Nissan, and Toyota.
Following this integration, users will be able to enjoy a better experience with playlist programming on the move. Also, they would be benefited from a new service known as My SXM, which is currently in its beta phase. This service will let users customize their favorite channels as per their preference. This service will directly compete with Pandora’s offerings, providing a personalized experience to the user.
Bottom line
After touching its lowest point three years ago, Sirius XM has come a long way. The stock is up more than 40% in the last one year. I feel there is still a healthy upside potential in the stock, considering the above discussed growth drivers. The company has seen tremendous growth in its subscriber base in the last few quarters, beating its own guidance.
With U.S. auto sales again picking up the momentum, this growth will continue in the future as well. Seeing Sirius’ significant growth in the automobile market along with improved cash flow and share buybacks, I recommend it as a buy.
The article Don’t Overlook This Cheap Stock originally appeared on Fool.com and is written by Madhu Dubey.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
