Sirius XM Radio Inc(NASDAQ:SIRI), a company that had been struggling much of the last decade and bleeding cash, has pleasantly surprised investors by adding subscribers that exceeded expectations.
At the start of 2012, the company had said it would add 1.3 million new subscribers for the whole of the year. However in the first quarter itself it added 404,596 subscribers of which more than half were self-paying, a rise of 148 percent from year-ago.
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The company has now raised its target for the year to 1.5 million subscribers.
Sirius growth is being driven by resumption in the demand for cars in the United States, following a revival in consumer sentiment. Subscribers directly buy their subscriptions from carmakers such as General Motors and Ford.
Self-paying subscribers are the bread and butter of the company as they form the core of its loyal clientele. It currently has about 22.3 million total subscribers of which 18.2 million are self-paying and the remaining are promotion or trial subscribers. It is hoping to convert a significant chunk of these trial subscribers to self-paying customers.
The company has a 45 percent record of converting its trial subscribers into self-paying ones. In the first quarter it added about 105,248 promotional subscribers.
Emboldened by the renewed demand Sirius has also raise its self-paid subscriber rates, which surprisingly, has met with a positive response.
In the first quarter, Sirius reported above $800 million and operating profit of $200 million for the first time
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Shares of the company have shown an impressive come back and recovered 38% from its June’s low of $1.80. Moreover in the past one week, the stock has surged over 13% and made 4-year high of $2.51 in yesterday’s session. However, today the stock saw profit booking and ended 3% lower at $2.40.