Sirius
XM Radio Inc(NASDAQ:SIRI), a company that had been struggling much of the last
decade and bleeding cash, has pleasantly surprised investors by adding
subscribers that exceeded expectations.
At
the start of 2012, the company had said it would add 1.3 million new
subscribers for the whole of the year. However in the first quarter itself it
added 404,596 subscribers of which more than half were self-paying, a rise of
148 percent from year-ago.
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Analysis
The
company has now raised its target for the year to 1.5 million subscribers.
Sirius
growth is being driven by resumption in the demand for cars in the United
States, following a revival in consumer sentiment. Subscribers directly buy
their subscriptions from carmakers such as General Motors and Ford.
Self-paying
subscribers are the bread and butter of the company as they form the core of
its loyal clientele. It currently has about 22.3 million total subscribers of
which 18.2 million are self-paying and the remaining are promotion or trial
subscribers. It is hoping to convert a significant chunk of these trial
subscribers to self-paying customers.
The
company has a 45 percent record of converting its trial subscribers into
self-paying ones. In the first quarter it added about 105,248 promotional
subscribers.
Emboldened
by the renewed demand Sirius has also raise its self-paid subscriber rates,
which surprisingly, has met with a positive response.
In
the first quarter, Sirius reported above $800 million and operating profit of
$200 million for the first time
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Shares
of the company have shown an impressive come back and recovered 38% from its June’s
low of $1.80. Moreover in the past one week, the stock has surged over 13% and
made 4-year high of $2.51 in yesterday’s session. However, today the stock saw
profit booking and ended 3% lower at $2.40.
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