Down 34% This Year, Will Sirius Stock Recover Following Q2 Results?

Sirius XM (NASDAQ: SIRI), a leading provider of satellite radio, is scheduled to announce its fiscal second-quarter results on Thursday, August 1. We expect Sirius XM stock to likely trade lower with revenues beating and earnings missing market expectations in the second quarter results. SIRI stock has declined 34% from $5.47 to $3.54 year-to-date, underperforming the broader indices, with the S&P growing about 14% over the same period. Notably, SIRI’s peer Apple (NASDAQ:AAPL) has seen its stock rise 14% to around $218 YTD. SIRI stock has traded at a low price range of $5- $7 due to a large number of outstanding shares (around 4 billion) in the last five years. But the stock has been hovering around the levels of $3 since the beginning of last year (FY 2023) due to headwinds in advertising and delayed recovery in the auto sales industry. The company relies on promotional listeners that purchase new or used vehicles to become self-pay subscribers. With interest rates having risen significantly over the past two years, auto sales are slowing. Pandora is also struggling to stabilize its monthly active users and total listening hours. In addition, the entire company remains heavily in debt at $9.4 billion. 

For the full year 2024, SIRI mentioned that it expects total revenue of approximately $8.75 billion, an adjusted EBITDA of approximately $2.7 billion, and $1.2 billion in free cash flow this year. Sirius XM naturally suffered a setback due to the pandemic – with a stay-at-home mandate at workplaces, institutions, and family gatherings. Even with the return of normalcy at present, the company’s business has been stagnant, rather the company saw its first ever revenue decline in FY 2023. That said, Sirius will have to focus solely on its content to compete with the bigger and more resourceful competitors in order to grow its business.

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

Trefis estimates Sirius XM’s Q2 2024 revenues to be around $2 Bil, below the consensus estimate. SIRI revenue grew marginally year-over-year (y-o-y) in its first quarter of 2024 at $2.16 billion, as 7% y-o-y gains in advertising were offset by slight declines in the subscriber revenue (which accounted for 78% of the total revenue in Q1). Despite its various entertainment channels, Sirius XM has struggled to grow its subscriber base. The overall SiriusXM self-pay subscribers decreased by 359,000 y-o-y in Q1 to 33 million, which was down from 34 million reported a year ago. In the off-platform segment, self-pay subscribers of Pandora Plus and Pandora Premium decreased by 64,000 y-o-y in Q1. We forecast Sirius XM’s Revenue to be almost $8.8 billion for the full year 2024, marginally down y-o-y.

(2) EPS likely to miss consensus estimates 

Sirius XM’s Q2 2024 earnings per share (EPS) is expected to be 7 cents as per Trefis analysis, below the consensus estimate. The company’s net income for the first quarter of 2024 was $265 million resulting in diluted earnings per share of $0.07, up from $0.06 for the same quarter of 2023. It should be noted that SIRI’s adjusted EBITDA came in up at 4% y-o-y in Q1.

(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 9.9x in fiscal 2024, this translates into a price of around $3, almost 15% lower than the current market price.

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