Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Sirius XM Radio Inc (SIRI) Will Add More Than 332,000 Subs Later This Year

Sirius XM Radio Inc (NASDAQ:SIRI)Sirius XM Radio Inc (NASDAQ:SIRI) has never been more popular. Shares of the satellite-radio provider closed in on yet another five-year high yesterday, after announcing that it added 715,000 net new subscribers during the past three months.

There are now more than 25 million subscribers to the service, and the robust inflows during the second quarter — fueled by strong automotive sales and a robust economy in which drivers aren’t flinching at paying a premium for commercial-free radio — find Sirius XM boosting its subscriber guidance for all of 2013. Sirius XM Radio Inc (NASDAQ:SIRI) now expects to close out the year with 1.5 million net subscriber additions, up from its earlier target of 1.4 million accounts.

The only downside to the rosier guidance is that Sirius XM Radio Inc (NASDAQ:SIRI) already has 1.168 million more subscribers than it had when the year began. In other words, we’re talking about just 332,000 net new subscribers during the second half of the year.

This would be a big deal if Sirius XM didn’t perpetually lowball its forecasts. It’s a safe bet that Sirius XM will be averaging more than 55,000 subscribers a month during the next six months. Think about it. Auto sales are still strong, and the growing number of connected cars and streaming smartphone apps are clearly not getting in the way of Sirius XM Radio Inc (NASDAQ:SIRI)’s growth.

We saw this play out last year. Subscriber guidance for 2012 began at 1.3 million. Throughout the year we saw that target inch up to 1.5 million, 1.6 million, and 1.8 million. The final tally clocked in at 2 million net new subs added.

This probably won’t be the only target that gets boosted higher as the year plays itself out. Average revenue per subscriber has been inching higher in recent quarters. Last year’s rate increase and a slight uptick in the music royalty fee are factors, but Sirius XM Radio Inc (NASDAQ:SIRI) has also been improving the features of the streaming service that it charges subscribers an extra $3.50 a month to access. It’s also been getting more automakers to offer the streaming add-on as part of the free trials, making it easier to convert into paying customers for the enhanced plan.

As average revenue per user moves higher, revenue naturally creeps up. However, the impact is even more dramatic when it comes to free cash flow, given the nature of the model in which the fixed costs are high and incremental revenue practically falls to the bottom line.

Sirius XM Radio Inc (NASDAQ:SIRI) has had a great first half of 2013, and the second half isn’t likely to disappoint.

The article Sirius XM Will Add More Than 332,000 Subs Later This Year originally appeared on and is written by Rick Munarriz.

Longtime Fool contributor Rick Munarriz and The Motley Fool have no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.