Sirius XM’s Stock Grew Almost 2x in Last 4 Years, Despite Seeing Decline in Net Income Margins

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Sirius XM Radio
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Sirius XM Radio‘s (NASDAQ: SIRI) stock price gained 95% in the last 4 years, trading from under $4 in February 2016 to over $7 in February 2020. While part of the increase was due to the markets assigning the company a higher P/E multiple, a bulk of the improvement in the company’s stock price has come from revenue growth (Sirius XM’s revenues increased by about 75%) and share repurchases. It should be noted that the company saw a 30% decline in net income margins during this period.

We have created an interactive dashboard on Sirius XM’s Stock Price Change where we factorize the increase in Sirius XM’s stock price, breaking it down into change in Revenue, Margins, and P/E Multiple.

#1. Sirius XM’s Total Revenue has grown 75% from $4.5 billion in 2016 to almost $7.8 billion in 2019, and is expected to grow by 4% to around $8.1 billion in 2020.

Revenue growth of about $310 million year-over-year (y-o-y) in 2020 to be driven by about $120 million from Subscriber revenues, $160 million from Advertising revenues, and $30 million from Equipment revenues

  • Sirius XM’s Total Revenue has grown 75% from $4.5 billion in 2016 to almost $7.8 billion in 2019 and is expected to grow just around 4% to $8.1 billion in 2020. A 35% year-over-year revenue growth in 2019 was largely due to the acquisition of Pandora’s business.
  • In 2020, we expect Subscriber revenue to grow slightly to about $6.2 billion in 2020, driven by slight growth in the subscriber base, increases in the average price charged, and the sale of additional services to subscribers.
  • We also expect Advertising revenue to grow by about 12% to about $1.5 billion in 2020, led by more advertisers being attracted to its national platform and growing subscriber base, as the company is set to launch additional non-music channels.
  • Equipment Segment revenue increased from $119 million in 2016 to $338 million in 2019, driven by higher royalty revenue generated from Sirius XM Canada and transition to new generation chipsets, partially offset by a decrease in data usage revenue generated from connected vehicle services.

Look at our interactive dashboard Sirius XM Revenues for more details in the company’s revenue segments and performance.

#2. Net Income increased from $0.7 billion in 2016 to $0.9 billion in 2019

Sirius XM’s net income declined to $0.6 billion in 2017, due to the reduction in net deferred tax asset balance as a result of the Tax Cut and Jobs Act. A sharp rise in 2018 was driven by a $43 million unrealized gain associated with the change in fair value of the company’s Pandora investment, in addition to savings from the Tax Act. We expect net income to rise to $1.1 billion in 2020.

  • Sirius XM’s net income grew from $0.7 billion in 2016 to $0.9 billion in 2019, which can be attributed to higher revenues.
  • Net income margin increased from 16.7% in 2016 to 21.0% in 2018. This was followed by a drop to 11.7% in 2019.
  • We discuss the factors that impacted the margin in our stock price change dashboard.

#3. Price-To-Earnings (P/E) multiple for Sirius XM has been volatile over the years but is higher than what it was in 2016

See all Trefis Price Estimates and Download Trefis Data here

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