By all accounts, the company should have been toast long ago. Satellite-delivered radio was always a bit too off-the-beaten-path, and with wireless internet now commonplace and with the advent of “connected” cars underway, there are just too many viable alternatives to Sirius XM Holdings Inc. (NASDAQ:SIRI) for the company to remain competitive.
And yet, numbers don’t lie. Sirius XM stock continues to extend a multi-year rally, in step with decade’s worth of consistent revenue growth, as well as earnings growth. SIRI stock is up 11% for the past year, up 26% for the past three years, and up 147% for the past five years.
The shadow of doubt cast on the suggestion that the next five years won’t be as rewarding for owners of Sirius XM stock as the past five years have been is largely rooted in technological advances — wireless internet makes it easy to use alternatives audio venues. Those doubts, however, overlook three key things that continue to draw an increasingly bigger crowd to what should be an obsolete service.
Three Things SIRI Stock Holders Have to Love
Sirius XM Radio is not only still around, but still thriving. The evidence? As of the most recently reported quarter, SIRI boasted a record 31 million subscribers, extending a sequential three-year growth streak. In fact, not counting the one quarter of stagnation it saw in mid-2013, the continuous growth streak is now going well over six years old.
The question that’s still baffling most observers who are more than a little familiar with the company’s story: How? It was supposed to be nothing more than a fading memory by now.
There are three explanations.
1. Sirius XM has personalities and programming alternatives don’t.
While its delivery approach is completely different than terrestrial radio, other than that, Sirius XM Radio looks … well, sounds a lot like traditional AM/FM broadcasting. That is, it sells its service using people, programming and personality rather than just music categorized by genre.
Indeed, no discussion of Sirius XM stock is complete without mentioning that bigger-than-life radio show host Howard Stern can only be heard on Sirius XM Raido. But, Stern isn’t the only draw for the company. It also has sports broadcasts, news, politics and more. It also names Marky Ramone, Fred Imus and Jim Breuer — just to name a few — as its personalities.
Those personality and talk-driven options simply don’t exist elsewhere the way they do for SIRI.
2. Sirius XM Radio is still winning where it counts most … the car.
The rise of connected cars has posed a threat to Sirius XM stock. If a smartphone, tablet, or even a car’s dashboard itself can link an automobile’s audio system to the internet-based streaming channels, why would a user bother paying for satellite radio?
As it turns out though, connected cars aren’t catching on with any real speed, while Sirius XM Radio tuners are an all-too-easy retrofit for automobiles that don’t yet have one. In fact, most consumers either don’t know or don’t care about most aspects of connected cars.
A survey performed by J.D. Power and examined by the L.A. Times Jerry Hirsch last year explains:
“In its 2015 Driver Interactive Vehicle Experience Report — a study of how new car owners use their vehicles within the first 90 days after a purchase — J.D. power found that at least 20% never used 16 of the 33 technology features measured.
For example, 43% ignored the voice link to a human concierge for directions or restaurant reservations. Another 38% never took advantage of a car’s ability to use a wireless link to create an Internet hot spot while 35% never tried the automatic parking system.
A third didn’t use a heads-up display which projects speed and other information onto the windshield, and 32% ignored apps embedded in the infotainment system such as Yelp or Pandora.”
A SIRI tuner, in contrast, is simple and not intimidating to use.
3. Sirius is still the most flexible option, for less than $1 per day.
Last but not least, the rise of online radio options like Apple Inc. (NASDAQ:AAPL) Music and Pandora Media Inc (NYSE:P) have forced SIRI stock to respond by allowing online streaming access to much of its programming. It has been adequate too, considering the continued growth of its subscriber base.
But, while Sirius can compete on the web — the mobile web at that — online-streaming competitors can’t compete in the satellite-delivered audio arena.
And yes, there are plenty of ways that matters.
As was noted, SIRI is easy to use in the car, and it also has personalities and programming that add value. Also working in its favor is that satellite radio works everywhere, whereas mobile internet service isn’t always great. And, unlike terrestrial radio, which is only available locally, Sirius’ personalities are accessible anywhere.
Bottom Line for Sirius XM Stock
A red-hot, screaming trade? No, Sirius XM stock isn’t that. It’s closer to being a tortoise than a hare. Just bear in mind the tortoise ended up winning the race in that popular fable. Thing is, SIRI stock has established a pretty significant moat for itself. This slow-and-steady progress was built to last indefinitely.
And yet, with only 31 million subscribers now, there’s still a massive piece of the market to penetrate in the foreseeable future.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
