No. of Recommendations: 5
SIRI has 34M subscribers. There are 283M registered cars in the USA (2.8M of those in Canada, I think). Very little tariff risk - woo hoo! :)
So ~11% of registered cars are members, worst case. Not horribly shabby.
There are 127M households, so 24% of households. If they stay there they will get some population growth (maybe)
SIRI is $8.7B MarketCap. Pandora <> Spotify, I know, but SPOT is a $126B market cap company. So one can dream...
I think rural drivers, sales-persons and older wealthy people will continue to use SIRIUS and it might always be an older subscriber base so I am not super concerned subscribers will age out. "Research published by the Federal Reserve shows the age of a new car or truck buyer has grown older over the past decade. It is now around 53 years old. They also note that among new vehicles buyers, the 55+ age group has a 15 percentage point increase since 2000." It is going to be an older demographic and SIRI is easy to use -- My 86/95 year old parents are not at all tech-savvy yet they love Facebook, iPhone and Sirius XM.
Subscribers peaked during COVID which makes sense. It might take some time to have subscribers climb back up but I think in the next 10 years there will be more than 34M subscribers as registered vehicles climb with the US population. New car purchases will have to increase eventually as the fleet ages out though average fleet life will continue to increase overall (probably).
They also have the 2nd highest rated podcast (Joe Rogan #1) in "Call Me Daddy" which is 70% women and 70% under 35 so maybe they can A/B test and bring in a younger demographic with disposable income.
Ad revenues increased more than they expected -- Stock is up 18% since earnings. CapEx should shrink, cost cutting is planned so they'll pay down debt and buy back shares and pay a dividend which are all decent uses of FCF which is roughly ~11.5%. You should get ~$4 in debt reduction and ~$2 in dividends over the next 2 years if they don't buy back shares instead of the debt reduction -- so what, ~20%? IF they grow FCF from $1B to $1.4B with cost savings and capex reduction things should go well -- and if they return to growth of subscribers or spend/subscriber you could get even better returns. Best thing that can happen is they deleverage I little bit, pay the divy and maybe sneak in a few share repurchases way down here. Or better yet, I will buy the shares with Berkshire and SIRI can focus on debt and dividends for now.
SIRI is up over 20% from it's low on Jan 13th. Though holding it and adding to it over the last year sucked! Bad. Double down like Berk! ;). This is not investing advice and I will be scaling back down as it climbs.
