Sirius XM Holdings stock (NASDAQ: SIRI) is down 53% so far this year, compared to a 28% growth in the S&P index. Notably, SIRI’s peer Apple has seen its stock rise 29% year-to-date. So why is SIRI stock underperforming?
The premium audio service provider is experiencing subdued revenue and adjusted EBITDA performance. Despite reaffirming its fiscal year 2024 revenue guidance of $8.675 billion, the company has downwardly revised its fiscal year 2025 revenue projection to $8.5 billion. Notably, the company’s business has exhibited limited growth over the past few years, with a notable decline of 0.6% in fiscal year 2023, marking its first-ever revenue contraction. Furthermore, the company anticipates two consecutive years of revenue decline, underscoring the need for strategic initiatives to revitalize growth. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
The company is currently facing several challenges, including a sluggish recovery in the automotive industry and adverse advertising trends. Additionally, Pandora continues to experience difficulties in stabilizing its monthly active users and listening hours. The company’s financial position also remains a concern, with approximately $11 billion in debt. In terms of subscription metrics, the company reported a 2% year-over-year (y-o-y) decline in total subscribers in the recent Q3, totaling 33.2 million, including paid promotional subscribers. However, the self-pay monthly churn rate remained stable at 1.6% for the quarter, indicating that existing subscribers are being retained at a consistent rate. That said, Sirius will have to focus solely on its content to compete with the bigger and more resourceful competitors to grow its business.
SIRI has had a poor run, with the stock losing value in each of the last 3 years. Returns for the stock were 0% in 2021, -8% in 2022, and -6% in 2023.
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SIRI revenue growth fell 4% year-over-year (y-o-y) in its third quarter of 2024 to $2.17 billion, marginally missing the analyst consensus estimate of $2.19 billion. The revenue decline was driven by a 5% drop in subscriber revenue to $1.65 billion, and a 2% decline in advertising revenue to $450 million. Net income for the third quarter of 2024 was -$2.5 billion resulting in diluted earnings per share of -$8.74, down from $234 million for the same quarter of 2023. The company’s adjusted EBITDA for the third quarter also decreased 7% y-o-y to $693 million, driven by softer subscriber revenue.
We forecast Sirius XM’s Revenue to be almost $8.7 billion for the full year 2024, down 3% y-o-y. Looking at the bottom line, we now forecast revenue per share to come at $25.62. Given the changes to our revenues and RPS forecast, we have revised our Sirius XM’s Valuation to around $27 per share, based on a $25.62 expected RPS and a 1.1x P/S multiple for fiscal 2024 – almost in line with the current market price (as of Dec 15).
For the full year 2024, SIRI mentioned that it expects total revenue of approximately $8.675 billion, an adjusted EBITDA of approximately $2.7 billion, and $1 billion in free cash flow this year. SiriusXM (now Sirius XM Holdings) also completed its merger with Liberty Sirius XM Group (Liberty Media’s Sirius XM tracking stock) in September. It also conducted its 1-for-10 reverse stock split during the same time.
It is helpful to see how its peers stack up. Check out how Sirius XM’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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