Investigating the Factors Driving SiriusXM's 50% Stock Fall in 2022
Sirius XM Holdings (NASDAQ: SIRI) has taken a 53% hit this year, contrasting with the S&P index's 28% growth. On the other hand, Sirius' rival, Apple, has seen a 29% increase in stock value during the same period. The question arises, why is SIRI struggling while Apple thrives?
Sirius is grappling with diminished revenue and adjusted EBITDA performance. Despite affirming a projected revenue of $8.675 billion for fiscal year 2024, the company has reduced its forecast for fiscal year 2025 revenue to $8.5 billion. Notably, the company's growth has been sluggish over the past few years, with a significant decrease of 0.6% in fiscal year 2023, marking Sirius' first-ever revenue decline. The company anticipates two consecutive years of revenue decrease, suggesting the need for strategic moves to restore growth.
Separately, for those seeking growth with less volatility, consider the High-Quality Portfolio, which has surpassed the S&P, delivering over 91% returns since its inception.
Sirius is facing several hurdles, including a slow revival in the automotive sector and unfavorable ad trends. Moreover, Pandora continues to grapple with stabilizing its monthly active users and listening hours. The company's financial health also raises concerns, with a substantial $11 billion in debt. In terms of subscriber figures, the company reported a 2% decrease in total subscribers in the latest Q3, resulting in a total of 33.2 million, including promotional subscribers. However, the self-pay monthly churn rate remained consistent at 1.6% for the quarter, indicating steady retention of existing subscribers. Nonetheless, Sirius must focus solely on its content to compete effectively against its rivals.
Sirius has endured losses in each of the previous 3 years. Returns for the stock were 0% in 2021, -8% in 2022, and -6% in 2023.
In contrast, the High-Quality Portfolio, comprising 30 stocks, demonstrates less volatility. It has outperformed the S&P 500 each year over the same period. One might wonder, why is this the case? The HQ Portfolio delivers superior returns with lower risk compared to the benchmark index, offering a smoother ride, as evident in HQ Portfolio performance metrics. Given the present uncertain macroeconomic climate surrounding interest rate cuts and multiple conflicts, could Sirius encounter a similar situation as in 2021 and 2023, resulting in underperformance versus the S&P over the next 12 months - or will it see a revival?
Sirius' third-quarter revenue fell 4% year-over-year (y-o-y) to $2.17 billion, slightly missing the analyst consensus estimate of $2.19 billion. The decline in revenue was influenced by a 5% decrease in subscriber revenue to $1.65 billion and a 2% decrease in advertising revenue to $450 million. For the third quarter, net income was -$2.5 billion, resulting in diluted earnings per share of -$8.74, a significant drop from $234 million for the same quarter in the previous year. The company's adjusted EBITDA also decreased 7% y-o-y to $693 million, driven by soft subscriber revenue.
We predict Sirius XM's Revenue to be around $8.7 billion for the full year 2024, a 3% decrease y-o-y. Looking at the bottom line, we predict revenue per share to be $25.62. Based on these changes in our revenue and RPS forecast, we have revised Sirius XM's Valuation to approximately $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 projected 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. Additionally, it carried out a 1-for-10 reverse stock split during the same period.
It's intriguing to compare Sirius' performance with its peers. Visit Peer Comparisons to see how other companies in various industries stack up.
Invest in Trefis' Market-Beating Portfolios
Explore Trefis' Price Estimates
Sirius' struggling revenue and valuation, currently at $8.675 billion for fiscal year 2024 and approximately $27 per share, respectively, contrast sharply with Sirius XM's rival, Apple, which has experienced a significant 29% increase in stock value this year.
Despite Sirius XM Holdings' projected revenue growth for fiscal year 2024, the company's stock valuation remains lower than Apple, raising questions about Siri's revenue potential and growth strategy.
