Satellite radio services supplier Sirius XM (NASDAQ:SIRI) isn't a great purchase because of rivalry from Apple (AAPL). Despite the fact that Sirius did post some great earnings numbers, still its development wasn't sufficient to justify a trailing P/E degree of 60. Sirius posted revenue development of just 11%, as net self-pay subscribers developed 7% to 21.3 million, a record-high as it included new 173,000 net self-pay subscribers that raised the aggregate number of subscribers to 25.8 million. While these numbers may look great to some, investors shouldn't overlook that Sirius is going to face more prominent rivalry from Amazon.com (AMZN).
Amazon Prime Music threat
Amazon is adding a music streaming service to its Prime subscription service.
This will prompt more intense rivalry in the streaming space. Amazon has entered into licensing deals with Warner Music Group, Sony Music Entertainment, and autonomous labels. Amazon has swore to add new songs to Prime Music consistently to further increase the song base. The most impressive point about the music streaming service is that Amazon is putting forth it essentially free in case of those who are as of now members of Amazon Prime. In comparison, Sirius charges anyplace in the middle of $119 and $200 a year for it service.
- Warning! GuruFocus has detected 3 Warning Signs with SIRI. Click here to check it out.
- SIRI 15-Year Financial Data
- The intrinsic value of SIRI
- Peter Lynch Chart of SIRI
Despite the fact that Amazon has never stated what number of members the Prime service has, reports suggest that it is more than 20 million, which is close to Sirius' 25.8 million user base. Amazon Prime gives users access to boundless free two-day shipping, alongside in excess of 500,000 books to obtain free from the Kindle Owners' Lending Library, and free streaming of more than 40,000 movies and TV episodes through Prime Instant Video. The expansion of a music service will pull in more customers to the Prime service.
Apple Carplay is as of now a risk
Rivalry from Amazon is a recently incubated risk for Sirius. Be that as it may, then again, Apple is as of now a huge danger for the organization. Not long ago, Apple had dispatched its Carplay service, which is an is a rebranded version of ios for automobiles.
Presently, Apple is the overwhelming smartphone player in the U.s. as 42% of users are on an iphone. Also, iphone's share has increased from 35% in the former year period, which means that the organization is still picking up footing. As Apple's Carplay is good with iphones, a perpetually developing user base of the gadget bodes well for Apple and terrible for Sirius XM.
Also, Apple's itunes Radio is also picking up footing as the organization is including more stations, while the acquisition of Beats Music will strengthen its position further.
Henceforth, since Apple is strengthening its substance base, and its Carplay service is required to addition steam, Sirius XM's prospects may be in a bad position.
Is Sirius' normal development a channel dream?
On the other hand, Sirius remains positive in regards to its prospects. It expects vehicle sales to increase to 16.2 million units this year, and Sirius expects to tap this market by taking off around 11 million trials this year.
Moreover, Sirius expects to profit from the second hand auto market. Sirius has a system of more than 12,000 dealers, and in excess of 3,000 dealers are occupied with its service line activity. This allows them to offer trials to dealers' customers who are getting their vehicle serviced at taking an interest locations.
Further, Sirius is wanting to change over all its 12,000 dealers to its service line that should possibly upgrade its chances of changing over more customers. Besides, Sirius is required to run more than 4 million trials in the second manager auto market this year
A feeble valuation and monetary record
Be that as it may then, since Apple's Carplay and Amazon's Prime Music service are in the market, Sirius won't think that it easy to develop its revenue as fast as it expects. Also, as specified prior, the organization is exceptionally expensive at a trailing P/E of 60, and a PEG degree of 1.91 establishes this point further.
What's more, Sirius' monetary record is not strong. The organization has an obligation of $3.45 billion, which is excessively high considering that it has cash of just $121 million on the asset report. Additionally, Sirius' present degree is also extremely feeble at 0.49.
Sirius is confronting strong threats from huge players such as Amazon and Apple. Moreover, the organization has a feeble asset report and is excessively expensive at the same time. Thus, investors would be better off staying far from Sirius XM as it doesn't resemble a decent investment.