Here’s Why You Should Hold Sirius XM Stock in Your Portfolio

Sirius XM Holdings’ SIRI earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and came in line in the other two quarters, delivering an average positive earnings surprise of 17.5%.

With expected long-term earnings per share growth rate of 15% and a market cap of $31.5 billion, it seems to be a stock that investors should retain in their portfolio for now.

Let’s take a look at the factors that have been driving the company’s performance.

Sirius XM largely benefited from subscriber growth in second-quarter 2018. Sirius XM added 483K net new self-pay subscribers in the second quarter to end with approximately 28.2 million self-pay subscribers.

Solid new car as well as used car conversion rates significantly contributed to self-pay subscriber growth. Moreover, improving new car as well as used car penetration bodes well for the company.

Sirius XM stated that that the monthly churn rate of 1.6% marked the lowest ever reported by the company over a quarter. Solid new car conversion rates of 39% and used car rates in the high-20s contributed to self-pay subscriber growth.

Notably, in May, Sirius XM launched iOS and Android apps, which received a positive feedback from users. Following the launch of the redesigned application, on-demand listening has increased 60%.

Management is optimistic about the agreement with Netflix NFLX “to create, curate and launch a full-time comedy channel with the streaming service.”

Though high royalty cost is likely to hurt the company's profitability and stiff competition remains a headwind, regular addition of self-pay subscribers is proving to be beneficial for this Zacks Rank #3 (Hold) company.

Key Picks

Vishay Intertechnology, Inc. VSH and AT&T Inc. T are a couple of top-ranked stocks in the same sector, both sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Vishay Intertechnology and AT&T is 9.2% and 3.8%, respectively.

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