Sirius XM (SIRI, Financial) performed very well in 2015, and the company is still witnessing strong growth. In the last reported quarter, the company shared record revenue of $1.2 billion, a surge of 10%. This was mainly due to the 3% surge in record average revenue per user, which reached to $12.78. On the other hand, free cash flow escalated to $395 million.
Furthermore, the company now anticipates adding approximately 1.7 million overall net new subscribers, 0.1 million greater than the previous guidance of 1.6 million. If the company successfully adds the given amount of subscribers, it will result in $5 billion  in additional top line and cash flow of $1.5 billion, which will be greatly beneficial for the company and Sirius investors.
Over the past few years, Sirius XM has achieved healthy growth by primarily placing its emphasis on new car sales. The company has successfully managed to get its technology into approximately three out of every four cars. Moreover, the contracts with the auto manufacturers have been effective in gaining more and more subscribers.
However, considering the current levels, it seems like the company has hit a saturation point with new vehicles. Therefore, the company has strategized to belligerently focus on the used car market instead of the new car market, as it has already grabbed a robust position in the new car market.
Recently, the company signed a three-year agreement with Christopher "Mad Dog" Russo, the sports talk icon. The terms of the deal were not disclosed, but Russo is a famous personality on satellite radio, which could help the company to gain additional benefits in the imminent quarters.
Sirius XM currently has two on-going major contracts with Russo and Howard Stern, which will help the company to appeal to subscribers as well as to stop subscribers from cancelling the service. Apart from this, it will also help Sirius XM to maintain its costs.
The company has further plans to use its enhancing cash flow generation to carry on making tactical investments as well returning capital to stockholders. Throughout 2016, the company detailed that its primary goal is to improve technology and content, and to build new satellite infrastructure.
Conclusion
Sirius XM has sustained its high growth rate despite the recent slowdown in the automobile market. Looking ahead, the company still has impressive growth prospects and the stock can still be bought at its current price.
Disclosure: I don't hold a position in the stocks mentioned in the article.
Start a free 7-day trial of Premium Membership to GuruFocus.
