Despite a 53% decline in Sirius XM stock (NASDAQ: SIRI) since the beginning of the year, there is potential for long-term growth, although short-term upside appears limited. The stock has dropped from $5.47 to $2.57 year-to-date, underperforming the broader market, with reasons including a large number of outstanding shares and challenges in the advertising and auto sales industries. The company relies on promotional listeners who purchase vehicles to become self-pay subscribers, but with rising interest rates and slowing auto sales, growth has been hindered. Despite these challenges, Sirius XM benefits from a historically low churn rate and trades at a relatively low forward earnings multiple with strong operating margins.
SIRI stock has faced a significant decline over the past three years, with returns of 0% in 2021, -8% in 2022, and -6% in 2023, underperforming the S&P 500 in two of those years. While consistently beating the S&P 500 has been difficult for individual stocks in recent years, a high-quality portfolio has outperformed the benchmark index each year over the same period. With uncertainties in the macroeconomic environment such as high oil prices and elevated interest rates, the question remains whether Sirius XM will see a recovery or continue to underperform in the coming months.
In its first quarter of 2024, Sirius XM reported marginal revenue growth year-over-year, with gains in advertising offset by declines in subscriber revenue. The company’s overall self-pay subscribers decreased by 359,000 from the previous year, while off-platform self-pay subscribers also saw a decline. Net income for the quarter was up from the previous year, resulting in diluted earnings per share of $0.07. Adjusted EBITDA also increased year-over-year in Q1.
Revenue for Sirius XM is forecasted to be around $8.8 billion for the full year 2024, with a slight decline expected year-over-year. Earnings per share are projected to be $0.31 for the year, leading to a valuation of around $3 per share based on expected earnings and a P/E multiple. The company has provided guidance for total revenue, adjusted EBITDA, and free cash flow for the full year 2024.
While Sirius XM faced challenges during the pandemic with a revenue decline in FY 2023, the company will need to focus on its content to compete with larger competitors and drive growth. Peer comparisons can provide valuable insights into how Sirius XM stacks up against its competitors in the industry. Investors can consider Trefis Market Beating Portfolios or explore Trefis Price Estimates for more information on investment opportunities.
