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How Sirius XM Stock Could Dive To $10
SIRISirius XM(SIRI) Forbes·2025-01-13 11:00

Core Viewpoint - Sirius XM Holdings stock has declined approximately 60% in 2024, attributed to challenges in the automotive industry and advertising trends, leading to an undervaluation of the stock with a fair estimate of 27pershare,whichisnearly2527 per share, which is nearly 25% above the current market price [1] Financial Performance - For the first nine months of FY 2024, Sirius XM's revenues fell 2% year-over-year to 6.5 billion, driven by a 3% drop in subscriber revenue to 5billion,whileadvertisingrevenuegrewby15 billion, while advertising revenue grew by 1% to 1.3 billion [2] - The company has reaffirmed its FY 2024 revenue guidance of 8.675billionbuthasreviseditsFY2025revenueprojectiondownto8.675 billion but has revised its FY 2025 revenue projection down to 8.5 billion, indicating limited growth with a notable revenue contraction of 0.6% in FY 2023 [2][3] - Sirius XM's total subscriber count decreased by 2% year-over-year to 33.2 million, reflecting a loss of about 800,000 subscribers since the end of 2021 [3][4] Subscriber Trends - The subscriber base has been declining since FY 2022, dropping from 34.2 million to 33.9 million in FY 2023, primarily due to slower growth in connected vehicle services and increased competition from streaming apps [4] - Sirius XM's monthly self-pay subscriber churn rate remains stable at 1.6%, but attracting new customers is a significant challenge [4][5] Competitive Landscape - Sirius XM faces intense competition from Spotify, which reported a 18.6% year-over-year revenue growth to 1.6billioninQ3,surpassingSiriusXM′stotalsubscriberrevenue[4]−Thecompanyhaslaunchedafreead−supportedtiertocountercompetition,butresultshavebeenlimited[4][5]StrategicInitiatives−SiriusXM′spartnershipwithHowardSternissettoexpireinDecember2025,highlightingtheneedfornewdealswithpopularpodcaststomaintainplatformappeal[5][6]−Thecompanyhasexpandeditspodcastofferingsthroughstrategicpartnerships,includingnon−exclusiveagreementswithpopularshows[6]FinancialChallenges−SiriusXMhasapproximately1.6 billion in Q3, surpassing Sirius XM's total subscriber revenue [4] - The company has launched a free ad-supported tier to counter competition, but results have been limited [4][5] Strategic Initiatives - Sirius XM's partnership with Howard Stern is set to expire in December 2025, highlighting the need for new deals with popular podcasts to maintain platform appeal [5][6] - The company has expanded its podcast offerings through strategic partnerships, including non-exclusive agreements with popular shows [6] Financial Challenges - Sirius XM has approximately 11 billion in debt and has expanded its pricing strategy to attract new users, which may risk existing subscribers downgrading to lower-cost options [7] - Revenue projections for FY 2025 are around 8.5billion,withpotentialdeclinestoabout8.5 billion, with potential declines to about 8.3 billion by 2026 due to various challenges [7] Margin Analysis - Sirius XM's net margins fell from about 15% in 2021 to 13% in 2022, with a slight recovery to 14% in 2023, but there is a risk of margins declining to about 9% in the near term [8][9] Valuation Insights - Currently trading at about 22pershare,SiriusXMisvaluedatapproximately7x2023earningsand8xestimated2025earnings,withapotentialdeclineinnetincomefrom22 per share, Sirius XM is valued at approximately 7x 2023 earnings and 8x estimated 2025 earnings, with a potential decline in net income from 1.3 billion in 2023 to about 750millionin2026[10]−Ifthecompanycontinuestounderperform,investorsmayassignalowermultiple,potentiallyleadingtoastockpriceofroughly750 million in 2026 [10] - If the company continues to underperform, investors may assign a lower multiple, potentially leading to a stock price of roughly 10 per share [10][11] Historical Performance - Sirius XM has experienced a decline in stock value over the past four years, with returns of 0% in 2021, -8% in 2022, -6% in 2023, and -58% in 2024 [12] Long-term Outlook - Despite current challenges, the company has a monopoly in satellite radio services and valuable expertise, suggesting potential for future success if a long-term view is adopted [14]