Can Sirius XM Holdings Inc (NASDAQ: SIRI) Beat Apple Inc (NASDAQ: AAPL)

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By Mark Michaels on August 14, 2014 Company, Technology & Software

Ever since going public, Sirius XM Holdings Inc (NASDAQ: SIRI) performed well. The American broadcasting business has continuously gained subscribers to its user base since the second quarter of the 2009 fiscal year, with the exception of the fourth quarter in 2013 last year. Just this last quarter, the company added 475,000 subscribers, making its user base a total of 26.3 million users. Out of this number, roughly 21.6 million people are self-pay subscribers.

Last year, the company reported revenues of $3.8 billion. That number is expected to grow by 9.2 percent this year. Furthermore, Sirius has increased its free cash flow by four over the past three years.

Sirius’s success has inspired other companies who are seeking to enter the radio industry. Apple Inc (NASDAQ: AAPL) is one of those companies who are hoping to do so. The iPhone maker is looking to expand the content they currently offer on iTunes Radio by adding on a new ESPN radio station as well as over 40 local National Public Radio stations. Users can access these new radio stations directly via iTunes Radio.

Another serious threat to Sirius is Apple’s CarPlay feature, which was released a couple months ago. This new system enables drivers to use voice commands and to push buttons to complete tasks like having text messages read out loud, using GPS to navigate to destinations, and activating song selections.

The CarPlay is a rebranded solution of Apple’s comprehensive iOS. Already, auto makers like Mercedes, Volvo, and Ferrari have started delivering cars that are pre-installed with Apple’s CarPlay. Apple is also expected to sign similar deals with Toyota (NYSE: TM) and Ford (NYSE: F). If these deals go through, CarPlay could very likely become a standard feature in automobiles sold in the United States. Sirius will need to come up with a way to compete against the California-based tech giant as it partners with auto companies and takes away Sirius’s market share.

Prior to the debut of Apple’s CarPlay system, Apple and Sirius operated in two completely separate spaces. Apple was primarily a hardware company while Sirius provided content. However, Apple’s recent purchase of Beats Electronics could be a game changer. Now a member of the content production market and $165 billion in reserve, the boundaries are high for Apple.

Another competitor, Pandora Media Inc (NYSE: P), is also a rising threat to Sirius. The internet radio service provider has begun to sign direct licensing deals with artists. It attracts new artists by giving them access to its invaluable pool of data. The data can help artists choose tour locations, songs, and tour partners. This move has forced Sirius invest aggressively, including signing a deal with Latino singer Pitbull for a channel solely dedicated to his music.

Despite these challenges, analysts are still bullish on Sirius. Twelve analysts have given the company a Buy rating, five rated the company as Hold, and two have called it as Sell. The consensus target price for the stock is $4.37, a growth of 27.8 percent.

Liberty Media will be closely watched to see what action owner John Malone will take to maintain Sirius’s position in the automobile radio space. Liberty Media currently has a 53 percent stake in Sirius XM’s stock.