Sirius XM Radio Inc (SIRI) is continuing on a high-growth trajectory as the company successfully monetizes listenership, generating $130 per listener per year compared to Pandora Media Inc’s (P) $8 per listener, and is also seeing a significant growth opportunity in the used car market, says James Marsh, Managing Director and Senior Research Analyst at Piper Jaffray & Co.
“For SiriusXM, I think they could have an excellent business model. They have figured out how to monetize listenership, and they are generating $130 per listener per year. If you compare that to Pandora, Pandora is probably extracting about $8 per listener per year. So it’s very high monetization of listeners. They have a lot of exclusive content,” Marsh said.
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Sirius is also generating a significant amount of free cash flow, as the company already has its satellite network in place and won’t need to invest in the network for a few years, Marsh says. Additionally, SIRI is looking a growth opportunities in the used car market, which could be even larger than the new car market.
“You already have a satellite network in place; don’t need any material investment to that satellite network until 2017. It is a huge free cash flow machine, and it used to be largely reliant on new car sales, but now you have a large installed base of radios in the used car market. So that’s going to be a huge growth opportunity for them, and we think over the next few years that used car market could be bigger than the new car market with a lot more subscriptions through the used car channel than from the new car channel…now, basically 70% of all cars that roll off the road have a satellite radio,” Marsh said.
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