Sirius XM Earnings Await – (SIRI) Stock Underperforming Ahead Of Earnings

Sirius XM Holdings' stock (NASDAQ:SIRI) finds itself under pressure ahead of this morning's earnings, after a year of underperformance in markets. The stock currently trades at $21.02, down 4% in the past 5 trading sessions, and a more significant 23.11% decline over the past year.

The completion of the merger with a Liberty Media subsidiary in September 2024 was initially met with enthusiasm, briefly propelling SIRI to a 52-week high of $25.23. The rationale behind the merger, to simplify ownership and boost operational efficiency, resonated with markets initially, however the subsequent months have painted a more nuanced picture.

EPS is expected to come in at $0.78 on the period, on revenue of $2.14billion. That would reflect a 1.41% sales decline Y/Y. It is also worth noting that the company has missed EPS estimates in three out of the past four earnings.

Also within the earnings release, markets will looking for key metrics, including subscriber additions (or losses), revenue growth, and adjusted EBITDA. The company's financial guidance for 2025, projecting $8.5 billion in revenue, $2.6 billion in adjusted EBITDA, and $1.15 billion in free cash flow, will serve as a benchmark against which actual performance is measured.

Currently, SIRI's price is below both its 50-day ($22.78) and 200-day ($22.67) Simple Moving Averages, a technical indicator suggesting potential downward momentum in the short to medium term.

The analyst community remains divided on SIRI's prospects. Morgan Stanley recently resumed coverage with an “Underweight” rating and a $23.00 price target, citing concerns about declining revenue and adjusted EBITDA. Their analysis suggests that while cost-cutting measures might offer some near-term relief, the long-term trajectory hinges on subscriber growth, a metric currently shrouded in uncertainty.

Conversely, Seaport analyst David Joyce has adopted a more optimistic stance, emphasizing the potential benefits of the new corporate structure, which could attract a broader investor base and improve trading liquidity. Joyce also points to Sirius XM's stable subscription model, loyal customer base, and untapped potential in podcasting and advertising as reasons for optimism.

Sirius XM has been actively pursuing strategic initiatives to bolster its business. The recent partnership with Vehlo, offering free SiriusXM trials to auto service customers, represents an effort to expand its subscriber base. The announcement spurred a modest 3.4% stock increase, indicating that investors recognize the value of such initiatives.

Furthermore, the company's consistent declaration of quarterly cash dividends ($0.27 per share) demonstrates a commitment to returning value to shareholders, providing a degree of stability amidst market volatility.

While the prevailing narrative focuses on subscriber growth challenges and potential revenue decline, the bulls suggest that Sirius XM's value proposition may be underestimated. It is said that the company has successfully cultivated a loyal subscriber base willing to pay a premium for curated content and an ad-free listening experience.

In an increasingly fragmented media landscape, this curated approach could become a significant differentiator. Furthermore, the potential for growth in the podcasting arena, coupled with the company's established infrastructure and reach, presents a compelling opportunity that should not be dismissed.

While the market is focusing on the short-term guidance cuts and analyst downgrades, long-term investors may see this as an opportunity to capitalize on a fundamentally sound business trading at a discount. The recent pullback may represent a buying opportunity for those who believe in the long-term viability of the subscription radio model and the company's ability to adapt to evolving consumer preferences.

Sirius XM stands at a potentially pivotal point. While the merger with Liberty Media and subsequent strategic partnerships have provided a boost, concerns about subscriber growth and revenue decline persist. The upcoming earnings release will be important in shaping sentiment and determining the stock's near-term trajectory. Whether the company can successfully navigate the evolving media landscape and capitalize on its strengths remains to be seen, but it certainly has it's supporters.