By Brandon Matthews
Expectations were high in January for a rebound in auto sales, and in most cases individual manufacturers exceeded their previous year’s sales numbers. The sales stoppage at Toyota (NYSE:TM) resulted in substantial year over year declines for the popular import. The numbers seem to indicate that Toyota’s woes had a negative impact on other Japanese automakers as well. As a result, the January numbers are disappointing to those anticipating a quick recovery in the OEM market.
From a Sirius XM Radio (Nasdaq: SIRI) perspective, the results are mixed. The Japanese brands have the lowest Satellite Radio penetration rates among automakers. Korean automakers Hyundai and Kia boast the highest penetration rates; each with 100% penetration in the United States. Ford (NYSE: F), GM, Mecerdes (NYSE:DAI), Chrysler (OTC:FIATY) and BMW (BIT:BMW) average approximately 70%. With the exception of only Chrysler, these manufacturers all posted strong January 2010 sales numbers that exceeded those of 2009.
Despite the most important partners posting the best results, SAAR (Seasonally Adjusted Annual Rate) estimates were scaled back on the overall numbers. Sirius XM has provided guidance based on a SAAR rate of 11 million units. January sales data resulted in estimates of approximately 11.5 million. Most of the analysts which follow Sirius XM have increased their own projections based on a projected recovery in the automotive space, yet most have projected SAAR rates at or above 12 million units.
Based on 11 million units, the auto industry as a whole needs to sell 916,667 vehicles per month on average for Sirius XM Radio to grow its subscriber base. January 2010 total vehicles sales came in at just 699,240, barely beating January 2009 sales of 653,564, during which time the credit crisis came into play.
The record low, first quarter, 2009 numbers, contributed to Sirius XM shedding nearly 400,000 subscribers from its ranks in the first quarter of last year. Since the January 2010 data was released, shares of Sirius XM have dropped from a new 52 week high of .95.
Position: Long SIRI
The scrap rate is 12M, so there is so much pent up demand, the industry has nowhere to go, but up.
You DO know that the recent share price has NOTHING to do with January Auto sales, right? In fact, after following SIRI for two years now, the ONLY driver of the share price is INSTITUTIONAL buying and selling. Good news, bad news, Howard, iphone app, etc… the share price acts on its own. After a 50% run-up, there will be profit-takers. This just happens to be on the day auto sales are released and people like you make the incorrect connection.
Thanks for the update, Brandon,
Here is my question: Yes, almost 50k more cars were sold this January (which may have been below what we were expecting), but didn’t Ford (and a few others) state last quarter that they were going to be increasing production by “x” percentage during Q1 of 2010? So, even if less cars were sold, there are still more cars being produced with SIRI/XM, which should bode well for our sub numbers in Q1. Is this correct?
Thanks.
This article has a real negative tone…not sure why, Brandon? Sales exceeded January 2009 and we lost the whole last week of January from Toyota. Those sales will be made up in future months or other companies will pick up the lost sales. jan and Feb are historically the lowest sales months for autos…this Jan had 4 fewer sales days. Ford sales were very strong. We sold over 11M cars last year. Do you really think we will sell less…Edmonds and no one else does. Mel says his model works with 11m sales. We will exceed that… Just think you need to put things a littrle more to in perspetive here my friend…just saying…
This article is a downer for Sirius.
YOY: UP 7%
Auto sales were especially good in December because people wanted to get the tax credit for buying a new car in 2009. That credit ended December 31,2009. Potential January car sales were taken in December so as to get the credit. Things will go somewhat back to normal in February, I hope.
Auto sales for Dec. 2009 were listed at 11.23 million
Exactly right. Why would anyone think that January sales would be high?
It seems to me that if sirius beats last year for the month they are on track to beating last year, the first year of profit. If every month could be 45,676 cars better would that do it?
Sir,
The January numbers were pretty terrific, all things considered. January is notoriously slow for Auto sales anyway. You seem a bit too pessimistic to me, since the credit crisis is still very much in play.
Brandon, I know you know better than to project the loss of subscribers in Q1 of 2009 of 400K to the OEM channel. In Q1, 2009, the company lost (37K) subs from the OEM, new car, sales channel, and (368K) Subs from the RETAIL channel. With Q1, 2010 already outpacing Q1, 2009, in OEM in January, and the CPO programs coming into full swing, your alarm over these numbers is concerning. These latest numbers posted by the Auto Manufacturers in No Way forecasts the doom and gloom you are portraying here. The Facts are contrary to your conclusion.
The rating of this article says it all.
File this one away for the next time someone accuses you of being a pumper.
I see you end your article with Position: Long SIRI. Now, I read this article putting a negative spin on auto sales and also noticed in the forum threads that you stated you would SELL your position if SIRI does not perform a RS? Now that certainly does not reflect a Long position for the company’s prospects and belief in the positive fundamental changes that occurred recently with increasing sub growth and FCF growth. These prospects have recently been supported by credit and equity upgrades?
What gives here?
institutions upgrade stocks and put higher price targets on them so you buy and they can dump everything they have……. its not that hard
Does Brandon have a split personality, sounds like we’re listening to two different people at times.
I think someone still bought a car and is now listening to Sirius/XM. That doesn’t sound so terrible.