These Stocks Want Your Commute Time
Stephanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When Amazon.com (NASDAQ: AMZN) bought Audible in 2008, the company had already revolutionized audiobooks, charging a monthly fee to consumers who are able to download a certain number of books each month. The company's mobile app has made it a popular take-along as commuters spend hours in traffic each week, allowing them to catch up on their reading while making a trip more enjoyable.
In this story I will analyze what Audible gives Amazon, and two alternative investments, SiriusXM radio and Pandora, the music service.
Growth in Listening
With 400,000 subscribers, Audible is currently growing at a rate of more than 30% per year. With a new app specifically for the iPad, Amazon.com may see even more growth in this segment of its operations.
For Amazon, Audible is likely a reliable source of revenue as the company spends money to go into new markets. Amazon.com is frantically working to launch its local delivery arm, which is keeping expenses high and earnings low. Shares in the company dropped following its second-quarter earnings call, in which the company reported an operating margin of only 0.5%. Operating expenses increased 23%, with spending on technology and new content comprising a large chunk of that.
But the news wasn't all bad for Amazon.com. The company predicts its net sales will be in the $15.5 billion to $17.15 range, which could be an increase over the second quarter's $15.5 billion in net sales. Analysts predict net sales will be close to $17 billion.
As exciting as Amazon.com's shift toward local delivery is, the company must spend money to make money. Steady earners like Audible will help bankroll those changes while making commuters' daily grind much more enjoyable.
Sirius Provides Talk
In the same way Audible lets commuters catch up on the latest bestsellers, SiriusXM (NASDAQ: SIRI) provides the chance to catch up on news, sports, and, yes, even audiobooks, via SiriusXM's Book Radio Channel.
Since the majority of new cars now come with SiriusXM pre-installed, the company has a thriving subscriber base. The satellite radio service added more than 715,000 subscribers in its second quarter, which was a 15.1% increase year over year. In total, SiriusXM has a total subscriber base of more than 25 million, helping it bring in $125.4 million in its most recent quarter.
Revenue for SiriusXM passed expectations, as well, bringing in $940.1 million, growing 12.3%. Expectations for the year are high, with SiriusXM planning to bring in $3.7 billion in revenues for the year. If the company adds 1.6 million new subscribers overall in 2013, it will continue to be the one to beat for commuter attention.
Pandora Makes Aggressive Move
Pandora is a listener favorite both during commutes and throughout the workday. By allowing customers to create radio stations that play the music they want to hear, Pandora has re-energized the traditional radio market.
In June alone, Pandora (NYSE: P) listeners logged 1.25 billion hours of listening time on the app, which sounds impressive until you consider most of those listeners aren't paying a dime. The company has a total of 70 million active users, but only 2.5 million paid subscribers, putting the pressure on advertising to pay the bills.
Pandora is the largest internet radio service in the world, with the biggest subscriber base of any music service. Since radio has traditionally been ad-based, it doesn't surprise analysts that the company brought in total mobile revenue of $89.3 million and overall revenue of $126 million. But the bad news is in the company's net loss, which grew to $28.6 million, up $8.4 million from a year ago.
Instead of forcing a paid subscription model for more of its users, Pandora is turning its attention to the exorbitant royalties streaming music businesses pay. The company is lobbying Congress for reform and collecting signatures from artists who are in favor of lowering rates.
The Bottom Line
Whether you listen to music, books, or news and sports on your morning commute, SiriusXM appears to be the true winner, with a strong subscriber base of listeners who pay for their services. While Pandora has more active listeners, unless it can find a way to become profitable each quarter, it will always lag behind businesses with more monetized business strategies.
Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Pandora Media. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!