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Why Have Sirius XM Holdings Inc. Shares Climbed 26% So Far in 2018?

Daniel B. Kline, The Motley Fool

Sirius XM (NASDAQ: SIRI) quietly continues to build its subscriber base despite seemingly being less needed in the marketplace than it once was. The satellite company has added customers even with the rise of unlimited access to nearly all music created for around $10 a month and the proliferation of podcasts.

What happened

Numbers were up across the board in the first quarter for Sirius XM, which operates on the calendar year and has not yet reported second-quarter results. Net income rose $289 million in Q1 ($0.06 per share) from $207 million ($0.04 a share) during the same period in 2017.

The company added 330,000 subscribers in the quarter to top 33 million paying customers for the first time. Total revenue rose accordingly, climbing 6% to $1.4 billion. In addition, Sirius XM reaffirmed its 2018 full-year guidance that calls for 1 million new customers and revenue of approximately $5.7 billion.

A person twists a radio knob.

Satellite radio comes installed in many new cars. Image source: Getty Images.

So what

While some of Sirius XM's success can be attributed to its strong subscriber numbers, the company has also helped its stock price by buying back shares. In Q1, the satellite provider spent $295 million buying back over 52 million shares of its stock.

That, plus the company's improving finances and subscriber gains, cheered investors. After closing at $5.36 at the end of 2017, shares rose to $6.77 at the end of June, a 26% gain, according to data from S&P Global Market Intelligence.

Now what

Sirius XM faces significant ongoing challenges as it becomes increasingly easy for consumers to access their smartphones in their cars. It may become hard for people to justify paying $15 or more a month when they already pay for a music service and there's a lot of free talk, news, and comedy available.

To combat that challenge, the satellite company will need to keep offering programming that people can't get anywhere else. It does that well in sports -- where it has game rights to the four major leagues -- and it offers Howard Stern, a unique radio talent. Growing that unique pool of content, however, is not going to be easy, as it's fighting with a number of other players -- not just traditional radio -- for some rights and talent.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.