Tesla and Sirius XM: A Promising Partnership Emerges from a Difficult Year

Streaming into the Future

A persistent issue for Sirius XM Holdings (NASDAQ: SIRI) investors and many Tesla (NASDAQ: TSLA) drivers is finally being addressed. Tesla’s popular models—Model Y, Model 3, and Cybertruck—lack factory-installed satellite radios. Only the premium Model S and Model X come equipped with Sirius XM receivers, yet these vehicles made up less than 4% of Tesla’s deliveries last year.

As a result, many Tesla owners have had to use Bluetooth to stream Sirius XM from their phones or rely on Tesla’s web browser. However, this situation is changing with the rollout of Tesla’s holiday software update this week.

Stock Trends and Concerns

The latest update from Tesla allows users to access Sirius XM’s platform through the car’s app. This advancement is timely, especially as Sirius XM’s stock performance has dwindled. Investors have watched its value plummet nearly 50% this year, contrasting sharply with rising equity prices. Concerns about negative revenue and subscriber growth have led skeptics to question whether Sirius XM has peaked. Despite Warren Buffett increasing his stake in the company and the stock trading at just 8 times forward earnings, fears of decline dominate investor sentiment.

In stark contrast, Tesla’s shares have soared over 40% this year, nearly tripling in value since the beginning of last year. Despite sluggish sales and potential issues with the expiration of electric vehicle tax credits, Tesla has managed to improve its year-on-year margins, even as it reduced prices on its vehicles and subscription services.

While the paths of these two companies seem divergent, Tesla’s new software features could significantly alter perceptions about Sirius XM, one of this year’s notable underperformers.

Image source: Getty Images.

A Game Changer for Sirius XM?

Integrating Sirius XM directly into Tesla’s dashboard is a move that should excite investors. However, opinions vary regarding its impact. Critics argue that many Tesla drivers are already familiar with alternative, often cheaper, streaming options. Tesla’s large monitor allows access to various streaming services while parked, meaning drivers can find plenty of entertainment without Sirius XM.

Importantly, accessing Sirius XM through Tesla’s interface won’t require a dedicated antenna, but users will need to subscribe to Tesla’s Premium Connectivity or have a Wi-Fi connection from their phone. While this may not deter drivers, it is a critical detail.

On a brighter note, Tesla drivers often spend significant time in their vehicles. Many choose to stay inside while charging, indicating that they might engage more with audio content during drives. Recognizing this potential, Sirius XM is offering Tesla owners a complimentary one-month trial of its live platform, alongside a discounted two-year subscription at $9.99 per month. This might attract many Tesla owners to at least try Sirius XM, even if only a fraction continues the subscription.

Despite its recent subscriber losses, Sirius XM has maintained a low monthly churn rate, demonstrating significant listener loyalty. New offerings like this could spark interest among potential subscribers, with curiosity possibly turning into engagement in the month ahead. As people explore channels featuring Howard Stern and diverse news, sports, and music, Sirius XM may find itself in a better position than anticipated. Although the stock hasn’t reacted yet, this development could set the stage for positive changes.

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Rick Munarriz has positions in Sirius XM. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are solely those of the author and do not reflect those of Nasdaq, Inc.