We reaffirm our long-term Neutral recommendation on SIRIUS XM Radio Inc. ( SIRI - Analyst Report ) . The first quarter of 2012 financial results were mostly in line with the Zacks Consensus Estimates. This improved performance was mainly due to strong management execution on the back of rising auto sales. In the last quarter, the company achieved several operating milestones including a record high net subscriber additions, massive adjusted EBITDA and free cash flow generation, and further penetration in the auto sector.

Management predicted that this momentum will further intensify in the rest of fiscal 2012 and accordingly projected a healthy financial outlook. We believe the introduction of Satellite Radio 2.0 and price increase will boost the company’s financials going forward. However, SIRIUS XM is currently facing a hostile takeover bid from Liberty Media Corp. ( LMCA - Analyst Report ) . We will closely monitor this development and believe the stock is fairly valued at this stage.

SIRIUS XM has a very strong business relationship with original equipment manufacturers. The company owns an extensive satellite network, covering the whole U.S. that provides audio contents through more than 170 channels. SIRIUS XM added 404,596 net new subscribers in the first quarter of 2012. This astonishing net subscriber addition helps SIRIUS XM to end the previous quarter with a record high total subscriber base of 22,297,420, up 8.4% year over year.

Payment category wise, Self-Pay subscriber was 18,208,090 while Paid Promotional subscriber was 4,089,330. The most important fact is that the Self-Pay subscriber net addition in the previous quarter increased 147.7% year over year to 299,348. The previous quarter was the best one with respect to net subscriber addition in the company’s history.