Sirius XM Faces Challenges Amid Declining Subscriber Base
Tuning in to Sirius XM (NASDAQ: SIRI) has been a challenging experience for investors, as shares have declined 50% from their 52-week high. The satellite radio leader is grappling with weak growth, prompting many to seek strategies to improve performance.
Despite these difficulties, Sirius XM remains an industry giant, boasting an audience of 160 million listeners and a steadfast subscriber base that generates significant cash flow. For those focused on income, the Stock‘s 5.2% dividend yield is noteworthy.
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Reasons to Sell Sirius XM Stock
The landscape for satellite radio has changed significantly since Sirius XM’s first broadcast in 2002. This once-revolutionary service has been overshadowed by the rise of internet music platforms, easily accessible via smartphones and mobile broadband.
Sirius XM’s collaborations with global auto manufacturers, who preinstall hardware and provide free trials, have failed to stop a steady decline in subscribers. The company now competes with powerful audio streaming services like Spotify Technologies along with music offerings from Amazon and Apple. This shift is evident in its recent growth trends.
According to the fourth-quarter 2024 results, Sirius XM reported 33.2 million paying subscribers, a decrease of 2% year over year and down 4.9% from its 2019 peak. The Pandora segment fared even worse, with total active users declining by 6% in the past year, highlighting a loss in market share.
For fiscal year 2024, revenue fell 4% compared to 2023. To address this, Sirius XM is working on cost control and focusing on its core strengths to counter the falling subscriber numbers. The company hopes that exclusive content such as live sports, podcasts, and celebrity-driven shows will help ignite a recovery.
However, investors skeptical about Sirius XM’s ability to regain its competitive edge may find solid reasons to sell the Stock now and explore better opportunities elsewhere.
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Image source: Getty Images.
Reasons to Buy or Hold Sirius XM Stock
Although Sirius XM’s growth figures are concerning, the company does maintain several robust fundamentals. Despite challenges, the business remains profitable, with nearly 40 million paid subscribers across Sirius XM and Pandora, alongside over 120 million ad-supported listeners. This led to $1 billion in free cash flow last year.
The stability of this subscriber base may offer real value to shareholders. Analysts forecast that total annual revenue will hold steady around $8.5 billion for 2025 and 2026. Earnings per share (EPS) are estimated at $3.02 for this year, possibly rising to $3.05 next year if financial margins and subscriber trends stabilize.
| Metric | 2025 Estimate | 2026 Estimate |
|---|---|---|
| Revenue | $8.51 billion | $8.53 billion |
| Revenue growth YOY | (2.2%) | 0.3% |
| EPS | $3.02 | $3.05 |
| EPS growth YOY | N/A | 0.1% |
Data source: Yahoo Finance. YOY = year over year.
This outlook may appeal to investors interested in the Stock‘s quarterly dividend of $0.27 per share, which yields 5.2%. Notably, the annual payout, totaling $388 million, appears sustainable and well-supported by recurring cash flow and earnings.
For income-focused investors, the high-yield opportunity could be a compelling reason to buy and hold Sirius XM Stock at this time. The Stock is trading at a forward price-to-earnings (P/E) ratio of 7 based on the consensus EPS for 2025, reflecting its high-risk profile. Though the share price may decline further, investors have a cash flow cushion while awaiting growth improvements. Additionally, unexpected gains in operating and financial results could serve as a catalyst for a significant rally in share price.
SIRI Dividend Yield data by YCharts
Proceed with Caution
Given the uncertainties surrounding Sirius XM’s growth and the fragile macroeconomic environment at the start of 2025, caution is advisable. Existing shareholders might find value in holding the Stock for dividend payments, while new investors may want to steer clear for now. Underwhelming subscriber figures and downward revisions to earnings estimates could lead to further share price declines. Until Sirius XM presents a clear growth trajectory, volatility in its shares is likely.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
