June SAAR and a Goldman Sachs Group Inc (NYSE:GS) consumer survey both highlighted strong growth at Sirius XM Radio Inc (NASDAQ:SIRI). The two data points have positive implications, thinks analyst Matthew Niknam.

Sirius XM

“June light vehicle SAAR of 16.0mn exceeded both GS (15.7mn) and Street forecasts, which we view positively for volume growth at Sirius XM Radio Inc (NASDAQ:SIRI). Notably, this marks the first time since 2008 that auto sales have touched the 16.0mn run-rate,” said Niknam.

Many investors in Sirius XM Radio Inc (NASDAQ:SIRI) also view the SAAR news as a positive indicator for the stock. And, the stronger than expected consumer confidence – also cited by Niknam – can lead to increased spending, especially for a consumer discretionary item like satellite radio.

GS Consumer Survey Highlights Positive for Autos

The Goldman Sachs Group Inc (NYSE:GS) Consumer team, in its recent quarterly survey of 2,000 U.S. consumers, found that respondents reported robust levels of optimism, with “intent to spend” reaching a new high in 2Q13, likely owing to ongoing jobs creation and the wealth effect from rising home and equity prices. Importantly, consumers indicated the most enthusiasm for spending on autos; the delta between autos and all other categories was significant.

SiriusXM Ends Q2 With More Than 25M Subscribers

Sirius XM Radio Inc (NASDAQ:SIRI) shares are up about 2.3 percent in pre-market trading today after the satellite radio broadcaster announced that it ended Q2 with more than 25M subscribers, a net addition of 715,000 — well ahead of analyst expectations. The increase in the quarter is 15% higher than the increase in the same period last year, a new record for the company since Sirius and XM merged in 2008.

Sirius XM Reiterates Annual Forecast

As a result, executives now expect to end this year adding 1.5M, up from their previous prediction for +1.4M. CEO Jim Meyer calls the Q2 results “an exciting new milestone” that should “bolster SiriusXM’s leadership position in a dynamic audio entertainment marketplace.” The company reiterated its forecast to add 1.6M self-pay net subscribers in 2013. Most of SiriusXM’s new customers are auto buyers, and the company attributes much of its recent growth to the continued strength in that market.

The company’s strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, notable return on equity, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures

GS Implications

Goldman Sachs Group Inc (NYSE:GS) believe both data points carry positive implications for volume growth at Sirius XM Radio Inc (NASDAQ:SIRI). They expect SIRI to utilize FCF and an under-levered balance sheet to aggressively repurchase shares; GS estimates imply SIRI can shrink its share count 20%-plus through 2015 and roughly 50 Percent the next 10 years.

Sirius XM Radio Inc (NASDAQ:SIRI) provides satellite radio services in the United States and Canada. The company broadcasts music, sports, entertainment, comedy, talk, news, traffic, and weather channels on subscription fee basis through two satellite radio systems.