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(Reuters) - Sirius XM Radio Inc raised its full-year subscriber and revenue targets, fueled partly by strength in the auto industry, where the satellite radio operator gets most of its customers.
Sirius, which competes with free Internet radio services like Pandora Media Inc, raised its full-year subscriber forecast on Monday to about 1.6 million from 1.3 million.
Sirius' rosier outlook followed surprisingly strong June U.S. auto sales, reported last week, indicating the industry is on track for its best year since 2007.
Sirius, which gets the vast majority of its subscribers through new U.S. car sales, said it added 622,042 net subscribers in the second quarter, up 38 percent from the year-ago quarter and well ahead of estimates for 410,000 and 495,000 from two analysts contact by Reuters.
Along with strong auto demand, Evercore analyst Bryan Kraft said the numbers also suggested Sirius did a better job than he expected at curbing customer cancellations, also known as churn.
"It's a combination of strong auto sales and strong execution in managing churn," said Kraft, adding that Sirius could beat his estimate of a 1.91 percent churn rate for the second quarter.
The subscriber boost led Sirius to raise its 2012 revenue target to about $3.4 billion from $3.3 billion and above analyst expectations for $3.36 billion, according to Thomson Reuters I/B/E/S.
The update came as Sirius Chief Executive Mel Karmazin fends off a fight for control of Sirius from John Malone, the chairman of Liberty Media Corp, which owns 46.2 percent of Sirius shares.
Liberty, which already holds five of 13 Sirius XM board seats, said in May it wanted to take over a majority of Sirius' board -- a disclosure Malone made without informing Karmazin.
Karmazin said in a statement Monday the company continues "to be conservative in the face of a weak U.S. economic outlook."
Sirius kept its previous targets for adjusted earnings before interest, taxes, depreciation and amortization at $875 million and for free cash flow of $700 million.
Sirius, which ended the second quarter with 22.9 million subscribers, said it added over 1 million net subscribers in the first half of 2012.
Shares of the company, valued at about $7.77 billion, added 1 cent at $2.06 in morning Nasdaq trade.
Reporting by Supantha Mukherjee in Bangalore and Sinead Carew and Liana Baker in New York; editing by Supriya Kurane, Gerald E. McCormick and Jeffrey Benkoe