Apple Inc. (AAPL): A New Player in the Internet Radio Industry

I do not believe that Apple will take a significant market share from Sirius at this point. The company has partnered with major automotive manufacturers to offer an integrated radio service for a modest fee. Further, the demand for automobiles is growing stronger each day, and Sirius should benefit from a rising number of customers.

Revenues from the automobile sector should remain strong until the day Apple targets this sector by forming alliances with more automakers. Investors should remain cautious regarding Apple’s strategy to enter the car business. I believe at such point, the business model for Sirius will be in serious jeopardy and an exit strategy in a long position should be evaluated.

Wrapping it up

Apple is a company that can enter any market due to its huge cash resources. By entering the internet-radio business, Pandora is in danger. The company has negative net income despite increasing revenues, and I fear Apple will take a significant market share. I would not recommend committing to long positions at this point, and I would reevaluate whether my investment is somewhat safe if my portfolio is exposed to the company.

Sirius, on the other hand, should fare better. Its partnership with auto manufacturers has proven fruitful. Its revenues are increasing, and a constant strong demand for new autos is a plus for the company as the number of subscribers is likely to increase. Sirius should continue to provide capital appreciation to its customers.

Finally, Apple should continue to fare well. Although I have no doubts that the company will take market share from other competitors, the radio section may not increase its revenues substantially. The sales of iPhones and iPads should continue to lead its revenues. I believe that Apple’s revenues should rebound in the interim, and I believe a long position should be considered in the company.

Robinson Roacho has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.

The article A New Player in the Internet Radio Industry originally appeared on Fool.com and is written by Robinson Roacho.

Robinson is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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