Audio entertainment company Sirius XM Holdings Inc. (SIRI) in New York City operates through two segments: Sirius XM and Pandora. With people spending less time on the road amid the COVID-19 pandemic, the company’s radio subscription services in vehicles witnessed lesser demand. However, the company has been taking steps to help its growth.

The stock has gained 3.3% in price over the past three months and 5.9% over the past year to close yesterday’s trading session at $6.26.

SIRA increased its full-year 2021 guidance for self-pay net subscriber additions, revenue, adjusted EBITDA, and free cash flow. Its SiriusXM self-pay net subscriber additions are expected to be more than 1.1 million, its total revenue is expected to be roughly $8.65 billion, its adjusted EBITDA is expected to be approximately $2.75 billion, and its FCF is expected to be more than $1.80 billion. Also, hedge funds have turned more bullish on the stock of late. So, its near-term prospects look promising.

Here are the factors that could shape SIRI’s performance in the upcoming months:

Positive Developments

SIRI announced on Dec. 20, 2021, that it had signed a deal with YMH Studios, the podcast network created and owned by Tom Segura and Christina P. On Dec. 16, 2021, the company announced that it will deliver a new benefit to listeners—a special offer for Apple Music. Also, SIRI and Discovery, Inc. announced on Dec. 15, 2021, that they are teaming up to create more value and choices for consumers, with subscription offers that deliver the best content from both companies.

Impressive Financials

For the third quarter, ended Sept. 30, 2021, SIRI’s total revenue increased 8.5% year-over-year to $2.20 billion. The company’s subscriber revenue increased 4.5% year-over-year to $1.67 billion, while its advertising revenue increased 30.7% from the same period last year to $451 million. It added a record 616,000 net new SiriusXM self-pay subscribers in the quarter. Its net income came in at $343 million, up 26.1% year-over-year. Also, its EPS increased 33.3% year-over-year to $0.08.

Favorable Analyst Estimates

Analysts expect SIRI’s revenue to increase 7.6% in its fiscal 2021 and 6.6% for the quarter ending March 31, 2022. Its EPS is expected to grow 24% in fiscal 2021 and 40% for the quarter ending March 31, 2022. Also, Wall Street analysts expect the stock to hit $7.36 in the near term, which indicates a potential 17.6% upside.

POWR Ratings Show Promise

SIRI has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. SIRI has a B grade for Stability, which is in sync with its 0.95 beta.

The stock has a B grade for Quality, which is consistent with its trailing-12-month EBITDA margin and a levered FCF margin of 29.68% and 13.96%, respectively, which are higher than the 21.93% and 11.40% industry averages.

SIRI is ranked #2 of 5 stocks in the Entertainment – Radio industry. Click here to see the additional POWR Ratings for SIRI (Growth, Value, Momentum, and Sentiment).

Bottom Line

SIRI reported revenue growth across all major categories in its last reported quarter. It surpassed revenue and EPS estimates in the quarter. Moreover, it increased guidance for its fiscal 2021. So, we think it could be wise to add the stock to your portfolio now.

How Does Sirius XM Holdings (SIRI) Stack Up Against its Peers?

While SIRI has an overall POWR Rating of B, one could also check out its other B-rated industry peers: Townsquare Media, Inc. (TSQ), Cumulus Media Inc. (CMLS), and Saga Communications, Inc. (SGA).

SIRI shares fell $0.03 (-0.48%) in premarket trading Tuesday. Year-to-date, SIRI has declined -1.42%, versus a -1.99% 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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