As Sirius XM Radio Inc (NASDAQ:SIRI) pushes into the used car market, analysts at Morgan Stanley (NYSE:MS) said they see several drivers for the company’s first quarter earnings report higher seasonally adjusted annual rates and used car conversion rates and continued merger-related cost synergies.

Sirius XM

In a report issued to investors this morning, analyst Benjamin Swinburne said they remain equal-weight on shares of Sirius XM Radio Inc (NASDAQ:SIRI), although they see plenty of upsides. They said throughout this year and next year, Sirius XM Radio Inc (NASDAQ:SIRI) should greatly benefit from rising seasonally adjusted rates as well as low fixed cost growth and falling variable expenses.

They highlighted the company’s announcement earlier this year that it would focus heavily on the used auto market, saying that their bull case depends on the company’s ability to yield more than expected subscriptions from its already installed radios.

Morgan Stanley (NYSE:MS) estimates that the “addressable used vehicle base” will grow rapidly from about 35 million today to approximately 75 million by 2017. They believe used car subscribers could end up accounting for about 20 percent of Sirius XM’s subscriber base in the future.

The analysts have updated their model to forecast 3 to 3.5 percent average revenue per user growth during the first quarter. That’s slightly lower than the 3.5 to 4 percent they were forecasting previously. They also modestly raised their expectations for first quarter net adds to 439,000 from 409,000 previously.

Morgan Stanley (NYSE:MS) analysts set their bull case at $4 per share if the recovery of the auto industry “hits full stride” and “pricing power remains strong.” Their base case is listed at $3.15 per share if the company’s seasonally adjusted annual rates recovers to $15.25 million in 2013 and buybacks begin this year. Their bull case is at $2 per share if competition for in-car listeners intensifies.

As of the moment of this writing, shares of Sirius XM Radio Inc (NASDAQ:SIRI) were up 1 percent.