The satellite radio services provider Sirius XM Holdings Inc. (SIRI), which is largely known for Howard Stern’s two exclusive channels on its platform, arguably got a new lease of life last December when Howard Stern signed a five-year contract extension with the company to run through the end of 2025. However, the stock has lost 12.9% over the past year and 5.4% over the past month.

As people spent less time on the road amid the pandemic, the demand for SIRI’s radio services declined.  The company is known for its connected vehicle services, which primarily drove its impressive performance before the pandemic. Furthermore, popular streaming services are also clouding the company’s prospects.

So, here are the factors that I think could influence SIRI’s performance in the coming months:

Announcement of Several Programs

SIRI’s subsidiary, Pandora,  announced on March 3 that the Pandora LIVE Countdown to the GRAMMY Awards will feature Haim, Brittany Howard and CHIKA on March 11, 2021. Pandora LIVE is a continuation of the popular live event turned virtual series. Also, SIRI and the Recording Academy joined forces in February  to celebrate the 63rd Annual GRAMMY Awards with the launch of The GRAMMY Channel.

The company also forged  a new collaboration with Tom Morello that  includes all-original content that spans  three new streaming music channels. It also includes a new additional weekly show launched on March 2 and an original podcast launched on March 3. The company also delivered   coverage of the 63rd running of the Daytona 500 on February 14,  including the live race broadcast.

Mixed Financials

The company’s total revenue increased 6.2% year-over-year to $2.19 billion for the fourth quarter, ended December 31, 2020. In the Sirius XM segment, subscriber revenue increased 2.6% year-over-year to $1.49 billion, while advertising revenue declined 12.5% year-over-year for the quarter. Also, subscriber revenue from the Pandora segment increased 3.2% year-over-year to $130 million.

However, SIRI’s loss from operations were  $503 million for the quarter versus  $399 million in income from operations for the fourth quarter of 2019. The company’s net was  $677 million for the quarter.

Streaming Services Taking over Satellite Radios

SIRI has been severely hit by the COVID-19 pandemic because  people are spending  more at home and travelling less by cars, which spells  less use of the company’s connected vehicle radio services. Meanwhile, streaming services provided by companies such as Netflix, Inc. (NFLX) are taking over the market as people have gravitated to its  offerings of new and existing shows on its over-the top (OTT) platform. This is evident in  NFLX’s 33.2% gains over the past year versus SIRI’s 12.9% loss over the same period. The company is also facing stiff  competition from digital music-streaming services providers such as Spotify Technology S.A. (SPOT).

POWR Ratings Don’t Indicate Enough Upside

SIRI has an overall rating of C, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. SIRI has a C grade for Growth. This is justified given that analysts expect its EPS to decline 14.3% for the quarter ending March 31, 2021 but gain 20% for the quarter ending June 30, 2021. Analysts also expect the company’s revenue to increase at a modest rate in the near term.

SIRI has a grade of C for Value as well in sync with its non-GAAP forward price/earnings of 20.95x, which is slightly higher than the industry average of 20.34x.

Click here to access SIRI’s ratings for Momentum, Stability, Sentiment and Quality as well.

Of 7 stocks in the C-rated Entertainment – Radio industry SIRI is ranked #2.

Bottom Line

The company has been trying to revive its prospects  by means of strategic partnerships and new collaborations and program offerings. However, with the advent of more lucrative TV and digital music streaming services, it’s uncertain if SIRI can grow significantly in the coming months without a major expansion of services or major changes in its offerings. So, we think it  wise to avoid the stock for now and wait for the company to make a comeback.

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SIRI shares were trading at $5.85 per share on Friday afternoon, up $0.06 (+1.04%). Year-to-date, SIRI has declined -7.94%, versus a 1.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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