Anticipation Builds as Sirius XM Prepares for Q3 2024 Earnings Report
Sirius XM SIRI is set to report its third-quarter earnings on October 31, 2024.
The Zacks Consensus Estimate for third-quarter earnings has decreased by 2.4% to 80 cents per share in the past 30 days.
Image Source: Zacks Investment Research
The revenue consensus stands at $2.19 billion, which reflects a 3.52% decline compared to the figure from a year ago.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Recently, on September 10, SiriusXM began operating as an independent public company with an updated capital structure and strategy.
Review of Previous Earnings Surprises
In the last quarter, the company met the Zacks Consensus Estimate for earnings. Over the past four quarters, Sirius XM has surpassed earnings expectations three times and matched once, achieving an average surprise of 14.44%.
Sirius XM Holdings Inc. Price and EPS Surprise
Sirius XM Holdings Inc. price-eps-surprise | Sirius XM Holdings Inc. Quote
Let’s examine the factors shaping this upcoming announcement.
Earnings Outlook
Currently, the model does not strongly indicate an earnings beat for SiriusXM this quarter. A positive Earnings ESP combined with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) tends to increase the odds of a favorable outcome, but this is not applicable here. Sirius has an Earnings ESP of -4.21% and a Zacks Rank #3 at present.
Factors Impacting Q3 Performance
Subscriber revenues for Sirius XM are expected to decline despite a broader content offering that includes live sports and a strong streaming portfolio, such as the ongoing 2024 NFL season. The second quarter saw subscriber revenues drop 3.9% year-over-year to $1.66 billion—a trend anticipated to persist in the current quarter. The Zacks Consensus Estimate for subscriber revenues now stands at $1.64 billion, marking a year-over-year decrease of 4.7%.
Sirius XM recently announced that Pandora Media LLC adopted Unified ID 2.0, enhancing advertisement targeting and efficiency. Advertisement revenues in the second quarter decreased slightly by 0.4% year-over-year to $433 million. However, the consensus estimate for third-quarter advertising revenues is set at $472 million, reflecting a year-over-year increase of 2.6%.
Continuing its commitment to enhance content, SiriusXM is expanding its audio library and recently launched SiriusXM Podcasts+, a new subscription that offers premium content in Apple Podcasts.
The firm retains a strong foothold in automotive entertainment, supported by partnerships with major car manufacturers like Toyota and Ford. As the industry evolves towards electric and autonomous vehicles, SiriusXM aspires to remain a leader in delivering in-car entertainment and information services.
In this quarter, Toyota signed on to SiriusXM’s three-year Extended Service Subscription program, aiming to provide more value to purchasers of new vehicles. Additionally, Ford Motor Company renewed its multi-year deal, allowing owners access to SiriusXM in their vehicles.
However, intense competition from tech giants such as Apple AAPL and Spotify SPOT poses challenges to SiriusXM’s revenue growth. Apple is solidifying its music streaming presence through acquisitions, while Spotify continues to expand its subscriber numbers through notable partnerships.
Moreover, SiriusXM faces disruption in its automotive stronghold, as innovative companies develop in-car entertainment systems, diminishing SiriusXM’s historical dominance. For example, Tesla TSLA has opted to implement its own entertainment systems, bypassing traditional satellite radio entirely.
Stock Performance and Valuation
Year-to-date, Sirius XM’s stock has plummeted by 50.6%, contrasting sharply with the broader Zacks Consumer Discretionary sector’s 4.9% gain. Such drastic declines have raised concerns regarding the company’s future and whether its stock presents a buying opportunity for informed investors.
SIRI Underperforms Sector
Image Source: Zacks Investment Research
From a valuation standpoint, SiriusXM’s current stock price could offer a compelling opportunity for long-term investors. The company’s forward 12-month price-to-earnings (P/E) ratio of 8.13 is significantly lower than the Zacks Broadcast Radio and Television industry average of 27.36. While this lower valuation may raise concerns in the market, it also suggests potential for growth if the company implements its strategies effectively.
SIRI’s P/E F12M Ratio and Valuation Insight
Image Source: Zacks Investment Research
Conclusion on Investment Strategy
SiriusXM’s stock downturn, driven by factors such as market volatility, rising interest rates, and digital disruption, indicates a cautious approach may be warranted for investors at this time.
SiriusXM’s Strategic Horizon: Merging Forces with Pandora for Growth
The Power of Combined Forces
The acquisition of Pandora has significantly boosted SiriusXM’s standing in the audio entertainment industry. Together, they boast an impressive North American listener base of over 100 million. By merging SiriusXM’s strong subscription service with Pandora’s successful advertising model, they are diversifying their revenue sources. This partnership allows for cross-platform sharing of content, which could enhance user interaction, attract more advertisers, and draw in talented content creators. With this increased scale and a varied content offering, SiriusXM is well-positioned to take advantage of changes in the digital audio market, presenting an attractive opportunity for investors seeking long-term growth.
Final Thoughts
SiriusXM’s stock performance in 2024 has not met expectations thus far, but the company’s strong standing, innovative approaches, and dual revenue model make it an interesting option for investors as they prepare for the upcoming third-quarter earnings report. The ability to adapt to media shifts and leverage new technologies is commendable. For those considering an investment in SiriusXM, it may be wise to hold off until a more favorable buying opportunity arises, especially given the competitive pressures in the marketplace.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
