Down 10% Since 2023, Will Sirius Stock Recoup These Losses After Q4 Results?

Sirius XM (NASDAQ: SIRI), a leading provider of satellite radio, is scheduled to announce its fiscal fourth-quarter results on Thursday, February 1. We expect Sirius XM stock to likely trade lower with revenues missing but earnings matching market expectations in the fourth quarter results. Sirius stock has been negatively impacted by headwinds in advertising and a delayed recovery in the auto sales industry since the beginning of 2023. In Q3 2023, the company saw a weak subscriber growth trend with 94k subscriber net losses and a churn of 96k self-pay net losses. Compared to Q3 2022, SIRI saw a new subscriber add of 138k. Pandora also continues to struggle to stabilize its monthly active users and total listening hours. In addition, the entire company remains heavily in debt at $9.4 billion. Despite all this, the media company benefits from a historically meager churn rate, with an implied average life for new car purchases of around five years – thanks to its solid business model. By taking advantage of the advertising reach it receives through radio, Sirius XM could likely push Pandora into podcasting for further growth opportunities. And, if we consider that SIRI stock now trades at 16x forward earnings with operating margins of 20% – the long-term price could see gains.

(1) Revenues expected to come slightly below the consensus estimates

Trefis estimates Sirius XM’s Q4 2023 revenues to be around $2.3 Bil, marginally below the consensus estimate. SIRI revenue growth was flat year-over-year (y-o-y) in its third quarter of 2023 at $2.27 billion. In addition, its subscription revenue came in flat at $1.7 billion, ad revenue was also flat at $460 million, and equipment revenue saw marginal declines y-o-y to $49 million in Q3. But total operating expenses also declined by nearly 6% y-o-y, meaning that operating income jumped 21% to $564  million. In the Sirius XM business, average revenue per user fell slightly to $15.69 from a year-ago $15.72. On Pandora and off-platform, ad-supported listener hours dipped to 2.64 billion from a year-ago 2.75 billion, and ad revenue per thousand listener hours rose to $104.33 from $103.32.

The company has used its healthy free cash flows to repurchase 40% of its outstanding shares over the past 10 years. Of course, this trend could likely change with contracting cash flow (down 26% y-o-y) in the first three-quarters of FY’23. For the full year 2023, we forecast Sirius Revenues to be $9.1 billion, up 0.6% y-o-y.

(2) EPS likely to match consensus estimates 

Sirius XM’s Q4 2023 earnings per share (EPS) is expected to be 8 cents as per Trefis analysis, in line with the consensus estimate. SIRI’s net income for the third quarter of 2023 was $357 million resulting in diluted earnings per share of $0.09, up from $0.06 for the same quarter of 2022.

(3) Stock price estimate lower than the current market price

Going by our Sirius XM’s Valuation, with an EPS estimate of around 31 cents and a P/E multiple of around 14.9x in fiscal 2023, this translates into a price of nearly $5, almost 5% lower than the current market price.

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