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Satellite Radio: Betting on Used Cars

by: Tyler Savery August 08, 2008 | about stocks: SIRI    

Tyler Savery

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I receive a lot of e-mail regarding the potential of satellite radio in the used car market. While I agree that there is a market there, I have trouble trying to use that factor as a reason to look at SDARS in any manner differently.

The used car channel has the advantage of giving satellite radio potential additional subscribers on vehicles that already have the radio installation subsidized and paid for. This makes that potential subscriber more profitable to the company, but how is that success measured? The lack of the ability to measure this metric always makes me discount it from an investment perspective.

Instead, I try to focus on the metrics that can be measured, and have more predictable results. I look at this used car market as an added bonus should it develop into something more measurable that adds to the bottom line.

While I do feel that SIRIUS XM Radio (SIRI) should try to market to these potential subscribers, I also recognize that there is no guarantee at this point how successful the marketing campaign would be. How much money should be spent in an effort to get an unknown amount of subscribers?

In order to get to their stated goals, and in order to impress investors, SIRIUS XM Radio needs to offer demonstrable results, and something that everyone can sink their teeth into. I view the used car market as having great potential, but am not hanging my hat on it. Results in this sector are in my opinion an added bonus.

What I feel will happen is that Mel Karmazin will get into a heavier marketing to this segment a few quarters down the road. The company is already addressing the certified pre-owned market, and that can deliver measurable results via reporting from the OEM’s. Extending beyond that too quickly, and investing heavy dollars into a program that is at best an experiment is not a move that I see Karmazin doing right off the bat. Given time, this market can develop further. Many potential subscribers may well activate via exposure to existing advertising.

The bottom line is that the used car market will develop with time organically. Know that it is there, and understand the potential, but in my opinion, don’t use it as a foundation for placing your bets.

Position - Long SIRI

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This article has 113 comments:

  •  
    Aug 08 08:04 AM
    I heard two important items. No reverse spit because he does not see it adding value to the company. The second being that he is focused on shareholders and their disappointment. I want a complete plan presented, not bits and pieces. This is the last report of Sirius as a stand alone company. I’ve waited this long. I certainly can wait until after Labor Day for a detailed and attainable plan moving forward. By then they will have had a whole 4.5 weeks with XM’s books. A little patience here is called for. The company needs to take care of its employees who will be displaced through consolidation and build its management plan utilizing "Best Practices" of the two companies now becoming one.
    Reply
  •  
    Aug 08 08:05 AM
    correction....reverse split not "spit"
    Reply
  •  
    Aug 08 09:17 AM
    Does anyone else here think there should be some new analyst rankings here? We are now even more than 20% below Wienkes price target of $1.75 for the combined company.

    I've enjoyed reading many of the comments by most of you all and appreciate the additional information and insights/feelings about this company.

    To VoV, what are you doing here? If you don't have a position on this company, why troll these articles?

    To VerySERIOUS, you really don't need to bash Tyler, he's disclosed his position that he's long, he will probably try to see the positive in this company going forward, it's his opinion/research, get over it please.

    About me, been buying both SIRI and XMSR since 2003, and averaging down like the rest of you longs. hopefully we'll see you on the happy side soon. Best wishes for all.
    Reply
  •  
    Aug 08 09:23 AM
    I have been the one harping on the used car segment. Thanks for addressing it Tyler.
    Reply
  •  
    Aug 08 09:57 AM
    Still not sold on your take of the used car market. My I bought my daughter a used Civic that had an after market Sirius radio. Since I already had one in my car I thought it was a no brainer. I recieved the family discount of $6.95 pr mnth. So I called Sirius from my cell while I was in her car and within a couple of minutes "Wham" she was activated. Hardly any cost to Sirius at all! But I knew about it being an existing customer. Making a new used car owner aware of the fact or with a small Sirius Xm incentive I think they should jump on this ASAP. Instead of costing the company to get customers they have a source to get "FREE" customers. As Mel has said in the past "It's tough to compete w? Free". Why let those millions of units sit idle?
    Reply
  •  
    Aug 08 10:16 AM
    Neal and Tyler are making the same point, for used cars to be measurable Sirius XM needs to come up with a plan to reach these customers and then measure the success. I think this is part of the greater problem with the retail chain. Maybe these Kiosks need to be expanded so people can accomplish something at them. Counting on BBY and CC for new sales just seems silly. The Ipod can stand alone, but ITunes is the killer app, Sirius XM needs something to draw interest, create retail sales and used car signups.... it needs a face.
    Reply
  •  
    Aug 08 11:27 AM
    The stock is down, so what? If you needed the money short term you shouldn't have bought SIRI. I started accumulating at $4.20 and have ridden it all the way down to our low of $1.29. Again, so what? I will sell when I think the time is right and that is not now. The people getting mad at the analysts are those who choose not to do any research themselves. There is no need to swear and trash these boards when you yourself probably made a stupid decision to buy on margin. Tyler, keep writing what you write. This is a blog and I welcome any insight whether I agree or not.
    Reply
  •  
    Aug 08 11:48 AM
    Market up 194, SIRI down .02. Same old stuff, different day. If I didn't have so much invested in this, I would have been rid of this stock already. The advise I took on buying this I thought was sound. From Cramer to Tyler and numerous other analysts opinions, this stock was ready for a bounce upon the merger approval. Only GS said otherwise, and they were right. I had no intentions of owning this garbage for years, like many others. I had held it long enough, just waiting for a good time to sell. Unfortunately, it went down too much too fast and now I am stuck. I am not trying to complain, I am just trying to make everyone understand what alot of us are feeling.
    Reply
  •  
    Aug 08 11:57 AM
    I'm not happy about where the price is just in case an emergency comes up and I need to liquidate all of my positions. However, my price per share is now at about $2.40 and I own 7500 shares. It's not anywhere near where a lot of people are but being early in career it's a lot for me. Luckily for me I still diversified. I have had a plan all along in that I was going to hold until 2011. I did my own research and gave the company at the end of 2011 a $5/share value due to lower operating costs and unpenetrated markets. So for me I really don't care what the price does until then. If I think the company falls below that value I will sell, and if I perceive the value to be higher I will hold on longer. As for you, stop being ignorant. Statements like what's the difference between paper and realized make you look as such. Stop letting analysts tell you what to do and do some research yourself. Otherwise, buy cd's.
    Reply
  •  
    Aug 08 12:09 PM
    kristin2024, So let me get this straight, when did you buy SIRI/XMSR?
    Reply
  •  
    Aug 08 12:21 PM
    kristin2024, I see you dont want to answer the question. When did you get in SIRI/XMSR, how long ago. Are you afraid to answer the question.
    Reply
  •  
    Aug 08 12:22 PM
    Last time I checked Tyler wasn't a financial advisor...he writes his opinion on the stock. If you are too f'ing dumb or lazy to do your own research then you should probably not be in the game. Quit blaming other people for your own ineptitude. You bought the stock, they didn't. I so tired of people coming on these boards and just spewing shit.

    I'm not happy about the price now either, but I did my own research and came to the conclusion that I wanted to invest in this company so I have only myself to blame. I still think siri is a good company and will turn it around, but it will take time and I'm willing to wait it out.

    I appreciate the insight from Killer, Cos, 163888 and the like!
    Reply
  •  
    Aug 08 12:28 PM
    I wish I had more money to dump in SIRI right now. I've done nothing but ride this ship down so far but when it comes back it will be worth it.
    Reply
  •  
    Aug 08 12:35 PM
    ksukenny, I am sick of these people also. They got in this stock for the merger pop, thinking they were going to make a quick buck and get out leaving us true longs holding the bag. So excuse me for not feeling sorry for this asinine people making these asinine comments. These are the retail investors that Mel was talking about being unsophisticated. I dont need an analyst to tell me after seeing the last quarters results that once you add 1.5 million subs along with the continued savings that have happen over the last few quarters, and then add the 400 million in savings. that they are not far from FCF positive and profit.
    Reply
  •  
    Aug 08 12:41 PM
    Hopefully it goes to a buck or lower. That is the ONLY way I get in on this stock. I was advised to wait til all the dust settles from this merger mess.
    I'm glad I took the advice.
    I'd like to see it go down to $.50, then it would be time to buy 20,000 shares and wait for a nice payday.

    Good luck to you all!
    Reply
  •  
    Aug 08 12:43 PM
    It won't be overnight. Just look at your own job as an example. If you work for a large company it often times takes weeks to push simple problems and solutions through. The management will need time to sort through all the information they currently have, collect additional information regarding the combined company, and then make informed decisions. That is when you will see a more clear picture of what SIRI will do. As for the cost savings, that is a done deal. It won't be long(year or two) before Sirius XM starts posting quarterly profits.
    Reply
  •  
    Aug 08 12:45 PM
    Kristin2024...we all know your opinion, why can't you just let it go. You made a decision now you have to live with it. If the stock market was a sure thing, everyone would do it and everyone would make money.
    Reply
  •  
    Aug 08 12:45 PM
    Most People were short on Siri, because they know it is the only way to make money on this stock.
    Once they made there money they got out.
    That's smart investing!
    Why?

    Because the short all knew this stock will amount to nothing after the merger.

    Winkie, Winner, hot dog or what ever his name from GS was right.

    No one wanted to listen, everyone just bashed him called him names & said he was with the NAB.
    Reply
  •  
    Aug 08 12:50 PM
    I truly believe that this is one last short selling day to try and get in as the tide is turning and even Cramer is switching his tune (again) While I hate Cramer and think he's a puppet, he does have influence. Look at all of you who bought because of him, well I think he's buying today along with GS and others who probably got in at 1.29/1.30 today and we should rebound to at least 1.50 after labor day. And then it's on as long as Mel starts developing a better public relations plan than he's done thus far. This stock may hover around 1.37 (where Mel Bought!) but within 6 months I'm sure we'll be closer to 2 than 1.3. Just my two cents based on my hunches which mean nothing but I'm not giving up yet

    Reply
  •  
    Aug 08 12:52 PM
    Everyone is in this to make MONEY NOT FRIENDS!

    LONG

    SHORT

    However you make a profit it's fine !
    Reply
  •  
    Aug 08 12:53 PM
    Believe me, it's been hard to sit on my hands and not pull the trigger.
    But I'll continue to play the waiting game even if it takes two or three years for profits to show themselves.

    Right now, too much risk than I'm willing to take on with $10,000.
    Reply
  •  
    Aug 08 01:02 PM
    hair pie, Remember I said it was going to be a hard 6 months ahead. I was afraid we were going to see Mel go with his normal "under estimate over deliver style". I was hoping he wouldn't do it, but I was afraid he would. I do think he should have come out with more, after 17 months of waiting but that has always been what Mel has done.

    Trust me on this I have said it many times look at the last few quarters the revenue from the new subs has been for the most part going to the bottom line cost are not going up they are coming down remember when I talked about this happening like a light switch, it is happening now. Look they just went from a loss of 79 million on EBITDA to 24 million loss take that a year further and what do you come up with even with out the 400 million in savings. I see by this time next year without any savings it going to 25 million at least in the positive, by the way for the first time ever being positive. That would have happen on a stand alone basis without any merger. As a matter of fact it would have happen much sooner, if the merger were not even mentioned and their hands were not tie for the last 17 months. All I am saying is, as a true long, I am happy as can be the merger is over. Believe me the best is yet to come. Even as Mel said, usually getting the merger approved is the easy part, making it work is the hard part. In this case, it was getting the merger approved that was the hard part, and getting it to work is going to be the easy part. I will leave you with this, Mel has always done what he said he would do and almost always ends up doing more.
    Reply
  •  
    Aug 08 01:05 PM
    163888, I don't feel sorry for them either...wasn't directing any of my comments toward you other than to say I enjoy reading your posts - always good info.

    I took all the information available to me and made my decision and I'm ok with it. Do I wish it was higher, yes, but that will take some time and I do see the light at the end of the tunnel like most people on here. I've been averaging down like most and I'm comfortable with my position.
    Reply
  •  
    Aug 08 01:05 PM
    Crest

    I understand yes $10,000 is a large amount. Hopefully you will get some of it back. I know that hurts .
    Reply
  •  
    Aug 08 01:14 PM
    Scot here. I just saw a big sign on this site where it read: "Caution, you are now entering the 'wank zone'". It should also say: "Must be 18 to enter." Well, now that I'm in I'll say this: I bought into Sirius amid the "Howard Hype." And this was AGAINST the advice from the brokerage firm who made me sign a disclaimer that if the stock tanked, I wouldn't sue them. So as it is today, I've watched the stock fall from $6.50 to todays low. So what does that mean? Well, for that, it means I'm sucking hind you know what. O'kay, so what. I can bitch, wank and moan, or, I can chalk one up for experience, grab my rear with both hands and ride it out -- I choose the later....

    Oh, I almost forgot, there is one more thing: I bought in with the attitude that I'll either lose it all or make a ton of money with no in between. So for those that have lost on paper, you have a choice: Hang on, or, sell at a loss, lick your wounded nards, and move on....

    Scot's Slant
    Reply
  •  
    Aug 08 01:14 PM
    Chapter 11, get off it that was just luck it went down that far. First of all there was no way to foresee Cramer minutes before SIRI offering its shares up to make it easyer for financing. would come out with a comment about it being a 2 dollar lotery ticket. That droped the offering from about 1.8 to 1.5 that is why it is this low. Mark W. did bring it down before but as we all saw it went back up. Mark W. had thought the amount was going to be twice as much as that actually was.
    Reply
  •  
    Aug 08 01:17 PM
    ksukenny, I know, I was responding to you as I agree with you.
    Reply
  •  
    Aug 08 01:19 PM
    163888

    What is the price at right now?

    Enough said !
    Reply
  •  
    Aug 08 01:20 PM
    Just so we are clear Mark W. thought the amount of shares to be offered up were going to be double. He also thought it was going to be more of a dilution that they were going to actually sell them and not just loan them out.
    Reply
  •  
    Aug 08 01:22 PM
    Chapter 11,
    That $10,000 is still on the sidelines....I'm waiting for siri to go below a buck. Or for the company to show profits. i'm just hoping it all aligns perfectly.
    Reply
  •  
    Aug 08 01:23 PM
    Crest

    Good luck to you !
    Reply
  •  
    Aug 08 01:24 PM
    HEY TYLER STOP BOOTING ME FROM THIS BOARD

    [This comment has been edited for bad language. The author does not control the comments on Seeking Alpha. This user has been, and will continue to be, banned by Seeking Alpha editors for continued bad language and inability to understand the rules of civil discourse that govern comments. - SA Editors]
    Reply
  •  
    Aug 08 01:25 PM
    Once again, what was it after his estimate. it went back up. It did not go down because of what Mark W. was saying it would go down for. He was off by as much as twice as much. Second are you saying he knew what Cramer was going to do at the time he was going to do it. That was the reason for it being as low as it is. The offering went from 1.8 to 1.5 because after Cramers statement the stock went down forcing the offering to go down.
    Reply
  •  
    Aug 08 01:28 PM
    163888

    Ok !
    Reply
  •  
    Aug 08 01:32 PM
    ghostOFserious, I stoped buying and selling stocks using Cramers advise a long time ago, TEVA was my lesson. While it did come back up after dropping to 30 from 41 which Cramer recommended it as a buy. It took over a year to get to 49, from 30. The lesson most should take from that though is I held because I still felt it was a good company. It was the right move because I ended up selling it at 48 after 2 years of holding it.
    Reply
  •  
    Aug 08 01:48 PM
    ghostOFserious, I take Tyler for what he is. He and his site gives information, that it would take me hundreds of hours to get on my own. When he comes out with an opinion I take it in, look at it, and make my own decision weather I agree with it or not. For the most part I do, but there are times I dont. I will remind all of you he and I both tried to tell you there was not going to be a short sqeeze and not to expect to much after the merger. I was lambasted for it, and debated it for more then 10 post, trying to say this. I know cos1000 remembers.
    Reply
  •  
    Aug 08 01:52 PM
    No one here has mentioned the admonitions of The Vicar. He told you there was no upside. How many times did he repeat this?
    Reply
  •  
    Aug 08 01:58 PM
    As I remember VicDave also said that the first time it was at 1.7 then when it went from that to 2.7, he was nowhere to be found. I guess a dollar on 1.7 stock was no upside. Then the reason we did not see his face again till it was back down was because he had no clue as to what it would do. Otherwise he would not have disappeared and would have stayed and said it will go back down.
    Reply
  •  
    Aug 08 01:59 PM
    You all dismissed The Vicar as some kind of pessimistic fool who wouldn't buy into your blind "groupthink" cheerleading. I encouraged all of you to look at this investment skeptically. You wouldn't listen, and you dismissed me. Now you're ended up with a losing stock and no one and nothing to blame but your ignorance and arrogance. I feel sorry for all of you.
    Reply
  •  
    Aug 08 02:00 PM
    It is all a gamble ! Who knows what the future brings.

    Those that are Long, if you are right on this you will be living the High life & retire. The rest of us continue on our 9 to 5 jobs wishing we were long.

    If the Shorts are right. You just saved yourself from a big loss.

    Who knows time will tell!
    Reply
  •  
    Aug 08 02:58 PM
    ghostOFserious, If you are talking about Tyler not commenting here to most like yourself. It is because I told him not to bother that if they dont get it after the 4 time it is not worth it. He has expained his position and said he is not a financial adviser and has never said buy sell or put price targets except the one time he said dont think this stock will go up to much after a merger that he thought it would have a hard time getting through the 3s. I have been reading his articles for some time and that was one of the only times I have seen him give anything that even looked like a price target, and even you could see that that was not even close to anything like a price target.
    Reply
  •  
    Aug 08 03:00 PM
    163888: My commentary is more intelligent than your investment choices. I never said this co. would go bankrupt.
    Reply
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