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.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Communication Services sector including GOOG, META, and NFLX, and even for the megacap stars TSLA, MSFT, and AMZN. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could SIRI face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?
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(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.
It is helpful to see how its peers stack up. SIRI Peers shows how Sirius stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
| Returns | Jul 2024 MTD [1] |
2024 YTD [1] |
2017-24 Total [2] |
| SIRI Return | 25% | -34% | -9% |
| S&P 500 Return | 0% | 14% | 144% |
| Trefis Reinforced Value Portfolio | 0% | 6% | 689% |
[1] Returns as of 7/30/2024
[2] Cumulative total returns since the end of 2016
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