Sirius XM (NASDAQ: SIRI), a leading provider of satellite radio, is set to release its fiscal third-quarter results on Tuesday, October 31. Despite a rough start to 2023, with its stock down 28% year-to-date, there are indications that Sirius XM may see a turnaround. In this article, we will explore the factors that have contributed to the stock’s decline, analyze the company’s financial performance, and provide insights into what can be expected from Sirius XM’s Q3 results.
Factors Contributing to Stock Decline
Sirius XM has faced headwinds in the advertising industry, as well as a delayed recovery in the auto sales industry. These factors have had a negative impact on the company’s stock performance. Additionally, Sirius XM’s subsidiary, Pandora, has struggled to stabilize its monthly active users and total listening hours. Furthermore, the company carries a considerable debt of $9.4 billion, which has also weighed on investor sentiment.
Positive Outlook for Q3
Despite the challenges mentioned above, there are reasons to be optimistic about Sirius XM’s Q3 results. The company’s subscription revenue remained flat at $1.7 billion in the previous quarter, indicating stability in its core business. While ad revenue saw marginal declines year-over-year in Q2, there is potential for improvement in the second half of 2023. Additionally, Sirius XM benefits from a historically low churn rate, thanks to its solid business model.
Furthermore, Sirius XM has the opportunity to leverage its advertising reach to boost growth in Pandora through podcasting. This could open up additional revenue streams and contribute to the long-term success of Sirius XM. Considering that SIRI stock now trades at 14x forward earnings with operating margins of 20%, there is a possibility for gains in the long run.
SIRI stock has experienced a decline of 35% from levels of $6 in early January 2021 to around $4 currently. In comparison, the S&P 500 has seen an increase of about 10% over the same period. However, it is important to note that consistently beating the S&P 500 has been difficult for individual stocks in recent years, even for heavyweights in the Consumer Discretionary sector.
For the full year 2023, Sirius XM expects total revenue of approximately $9.0 billion, with an adjusted EBITDA of approximately $2.7 billion. The company has also improved its free cash flow outlook for 2023 based on lower expected cash taxes and improved working capital in the second half of the year.
Earnings and Stock Price Expectations
Trefis estimates that Sirius XM’s Q3 2023 revenues will be around $2.3 billion, slightly above the consensus estimate. The company’s subscription revenue is expected to remain flat, while ad revenue may see some improvement. Trefis also projects that Sirius XM’s Q3 earnings per share (EPS) will be 9 cents, higher than the consensus estimate of 8 cents.
Based on Trefis analysis, Sirius XM’s valuation suggests a price of nearly $5 per share, which is 18% higher than the current market price. This indicates that there is potential for the stock to see an upward movement in the future.
While Sirius XM’s stock has faced challenges in 2023, there are signs of a potential turnaround. The company’s solid business model, low churn rate, and opportunities for growth through podcasting provide reasons for optimism. The upcoming Q3 results will provide further insights into the company’s performance and its ability to navigate the current market conditions.
Disclaimer: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.