Sirius XM is set to announce its fiscal first-quarter results, with expectations of beating revenue estimates and matching earnings expectations. The company has been negatively impacted by headwinds in advertising and a delayed recovery in the auto sales industry in 2023, with its stock down 45% this year. This is reflected in the company’s revenue decline of 0.6% for 2023, the first annual dip in its history. Subscriber revenue, advertising revenue, operating profit, and pre-tax income also declined for the year, with free cash flow 23% lower than in 2022.
Despite these challenges, Sirius XM’s guidance for FY 2024 calls for $8.75 billion in revenue, slightly lower than the previous year. The company expects free cash flow to remain steady at $1.2 billion with a slight decline in adjusted earnings before interest, taxes, depreciation, and amortization. Sirius XM benefits from a historically low churn rate, with an implied average life for new car purchases of around five years, thanks to its solid business model. The company could leverage its advertising reach to push Pandora into podcasting for additional growth opportunities, potentially leading to long-term gains for SIRI stock.
SIRI stock has faced a significant decline in recent years, losing 50% of its value since early 2021. In contrast, the S&P 500 has seen a 35% increase over the same period. Returns for SIRI stock were flat in 2021, -8% in 2022, and -6% in 2023, underperforming the S&P 500 in these years. The Trefis High Quality Portfolio, which consists of 30 stocks, outperformed the S&P 500 each year over the same period, indicating the benefits of a diversified portfolio strategy. Given the uncertain macroeconomic environment, there are concerns about whether SIRI will underperform the S&P 500 in the next 12 months or see a recovery.
Trefis estimates Sirius XM’s Q1 2024 revenues to be around $2.2 billion, slightly above the consensus estimate. The company posted a 0.2% increase in revenue year-over-year in Q4 2023, the first increase after three consecutive declines. Earnings per share for Q1 2024 are expected to be 7 cents, matching consensus estimates. The stock price estimate based on Trefis analysis is around $3, 11% higher than the current market price. Peers comparisons show how Sirius stock stacks up against its competitors, providing useful insights for investors looking at the stock.
Overall, Sirius XM faces challenges in the advertising and auto sales industries, reflected in its stock performance. However, the company’s solid business model and potential growth opportunities in podcasting could offer long-term gains for investors. It remains to be seen whether Sirius XM can outperform the S&P 500 in the coming years, but with a focused strategy and attention to market trends, the company may be able to overcome its current challenges and drive future growth.
