The largest satellite radio company in the U.S. – Sirius XM Holdings Inc. (SIRI - Free Report) has sealed a deal with Chrysler Group LLC. Per the deal, Chrysler Group’s customers will get a complimentary five-year subscription to SiriusXM Traffic and SiriusXM Travel Link.
It is worth noting in this regard that last week, Sirius XM had signed a similar agreement with Ford Motor Co. (F - Free Report) .
These services will be available on all 2015 Chrysler, Jeep, Dodge, Ram Truck vehicles and also on select 2014 models that are equipped with navigation facility. Once implemented, Chrysler Group customers will be able to receive vital information like traffic conditions, fuel price, movie listings, sports scores and weather information through satellite from SiriusXM.
The company is making a serious effort to increase its radio penetration in new automobile models. In the last concluded quarter, the company’s radio penetration in new cars rose to 70% from 67% in the year-ago period. Lower-than-expected auto sales numbers was the main reason behind a mere 3% increase in Sirius XM’s radio penetration over the past one year.
With the market for new cars having already reached a saturation point, Sirius XM also foresees untapped potential in the second hand car market. SIRIUS XM has more than 12,000 dealers who have provided it with vehicles sales information. The company is expecting to cover more than 4 million second hand cars in 2014 backed by a rising number of dealers.
We believe Sirius XM’s decision to tie up with Ford and Chrysler Group will boost the company’s top line and serve as a long-term growth driver. However, even a minor fluctuation in auto sales may significantly affect the company’s financials. SIRIUS XM believes that new cars sold with satellite radios should toll 11 million in 2014 as against 10.7 million last year. Moreover, the figure is expected to double in the next five years.
Other Stocks to Consider
Some well-placed stocks worth considering in this sector are GrupoTelevisa, S.A.B. (TV - Free Report) and LIN Media LLC . Both these stocks holds a Zacks Rank #2 (Buy).