Sirius XM Holdings (SIRI) beat top-and-bottom-line expectations by reporting strong performance in Q4 of 2024 with $2.19 billion in quarterly revenue and $8.7 billion for the entire year. The company’s growth was fueled by subscriber acquisition and churn metrics improvements, largely due to enhanced automotive trials and new partnerships with Tesla (TSLA) and Rivian (RIVN). Even though the satellite radio market isn’t growing significantly, SiriusXM continues reducing operating expenses and capital expenditures, which has resulted in notable earnings growth.
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The stock trades at a discount, making it a potentially attractive option for value-oriented investors, which is likely why Warren Buffett’s Berkshire Hathaway ($BRK.A) ($BRK.B) is among its largest shareholders.
An Updated Strategic Plan
SiriusXM is a major player in the North American audio entertainment sector and has a diverse range of products. At its core, it offers a flagship subscription-based entertainment service alongside ad-supported and premium music streaming services from Pandora. Its portfolio also encompasses an expansive podcast network and business and advertising solutions. The company’s content offering reaches a monthly audience of approximately 167 million listeners.
The company recently announced an updated strategic plan, which refocuses SiriusXM’s attention on its main subscription business. It aims to utilize the strength of its advertising business across its portfolio, increase overall efficiency, and maintain robust margins with a focus on free cash generation and shareholder returns.
The company is targeting an incremental $200 million in annualized savings by the end of 2025. It plans to reduce its debt by approximately $700M in 2025 and commit to its existing quarterly dividend.
Earnings Beating Expectations
For the fourth quarter, SiriusXM reported revenue of $2.19 billion, outperforming analysts’ forecasts by $20 million. The company reported full-year revenue of $8.70 billion with an adjusted EBITDA of $2.73 billion and a free cash flow of $1.02 billion. SiriusXM’s subscriber base decreased, ending the year with 33 million subscribers. Despite the decrease in subscribers, the company maintained a stable adjusted EBITDA margin of 31% and enjoyed a slight increase in the Pandora segment’s revenue driven by advertising and subscription revenue gains.
The company posted A net loss of $2.08 billion, mainly attributed to a significant non-cash impairment charge recorded in Q3. The GAAP earnings per share (EPS) of $0.83 beat expectations by $0.12.
The Board of Directors posted a quarterly cash dividend of $0.27 per share, payable on February 25, 2025, for the stockholders of record as of the close of business on February 7, 2025.
Analysts Take a Cautious Stance
The stock has been downward, shedding over 60% in the past three years. Yet, the recent positive earnings news has helped to catalyze the stock up over 9% in the past week. It trades near the low end of its 52-week price range of $20.47 – $53.50 but shows positive price momentum as it trades above the 20-day (22.35) and 50-day (23.48) moving averages. The stock trades at a discount based on its P/S ratio of 0.93x compared to the Communication Services sector sector average of1.3x.
Analysts following the company have taken a cautious stance on SIRI stock. Sirius XM Holdings is rated a Hold overall, based on the recent recommendations of 11 analysts. Their average 12-month price target for SIRI stock is $24.47, representing a potential upside of 1.92% from current levels.
SIRI in Summary
SiriusXM has recently delivered strong financial performance, attributed to increased subscriber acquisition and success with automotive trials and partnerships. The company is focusing on its core subscription business, aiming to boost overall efficiency while generating free cash and rewarding its shareholders. Despite a downward trend over the past three years, the recent earnings news has sparked positive price momentum in the stock. SIRI offers a potentially attractive option for value-oriented investors.
