AUS
NZ
UK
CA
USA
IND
Sirius XM (NASDAQ:SIRI), a leading provider of satellite radio, is set to announce its fiscal second-quarter results on Thursday, August 1. Despite revenues likely exceeding expectations, earnings are expected to fall short, which could lead to a decrease in stock value. Year-to-date, SIRI stock has dropped 34% from $5.47 to $3.54, significantly underperforming compared to the S&P 500, which has grown about 14% over the same period.
Notably, peer Apple (NASDAQ:AAPL) has seen a 14% increase to around $218 YTD. The stock has been trading between $5 and $7 over the past five years due to a large number of outstanding shares (around 4 billion). However, it has hovered around $3 since the beginning of last year (FY 2023) due to challenges in advertising and a delayed recovery in the auto sales industry. The company depends on promotional listeners from new or used vehicle purchases to convert to self-pay subscribers. With significant interest rate increases over the past two years, auto sales have slowed. Additionally, Pandora is struggling to stabilize its monthly active users and total listening hours, and the entire company remains heavily in debt at $9.4 billion.
For the full year 2024, Sirius XM projects total revenue of approximately $8.75 billion, an adjusted EBITDA of about $2.7 billion, and $1.2 billion in free cash flow. The pandemic impacted Sirius XM's business significantly, with stay-at-home mandates affecting workplaces, institutions, and family gatherings. Even with the return to normalcy, the company's business has stagnated, experiencing its first-ever revenue decline in FY 2023, a trend that contrasts sharply with the growth seen in many technology stocks.
To grow its business, Sirius XM will need to focus on its content to compete with larger, more resourceful competitors. SIRI stock has experienced a sharp decline of 35% from $6 in early January 2021 to around $4 now, compared to a 45% increase for the S&P 500 over the same period. The decrease in SIRI stock has been inconsistent, with returns of 1% in 2021, -3% in 2022, and -4% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating SIRI's underperformance in 2021 and 2023.
Consistently outperforming the S&P 500 has been challenging for individual stocks, including heavyweights in the Communication Services sector such as GOOG, META (NASDAQ:META), and NFLX, and even megacap stars like TSLA, MSFT, and AMZN. In contrast, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period, providing better returns with less risk. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, Sirius XM might face a similar situation as in 2021 and 2023, potentially underperforming the S&P over the next 12 months. Our forecast indicates that Sirius XM’s valuation is around $3 per share, which is 15% lower than the current market price. For more details, look at our interactive dashboard analysis on Sirius Earnings Preview: What To Expect in Q2.
