Can Sirius XM Stock Cross $6-Mark Post COVID-19 Crisis?

by Trefis Team
Sirius XM Radio
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Comparing the trend in Sirius XM stock (NASDAQ: SIRI) over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 20% to levels over $6, once fears surrounding the coronavirus outbreak are put to rest. The company’s solid business model, which comprises of an 80-20 subscription-advertising mix, could help SiriusXM weather the current coronavirus situation better than most other media companies.

A detailed comparison of Sirius XM performance vis-à-vis the S&P 500 is available in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Sirius XM Stock Fare Compared With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. SIRI stock lost 38% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 16% over recent weeks (vs. about 26% gain in the S&P 500) to its current level of over $5.

Sirius XM Stock Fell Because The Situation On The Ground Has Changed

SIRI stock declined on the concerns of how the business would perform in the current crisis. COVID-19 outbreak put concerns on the already declining auto sales as consumers were hardly making any big-ticket purchases under the prevailing conditions. Furthermore, most of its users started working from home instead of using the services while commuting to work, likely hitting its satellite radio subscription revenues.

However, Sirius XM reported a solid Q1 despite these coronavirus headwinds. It posted a pro forma revenue growth of 5% to $2 billion. It also reported a strong 40% growth in EPS for Q1. In addition, self-pay subscribers also grew to 34.8 million, up 2% year-over-year. Lower auto sales did not impact Q1 but are expected to hit the company in the coming months.

We believe Sirius XM’s Q2 results will confirm this reality with a drop in its total revenues. If signs of coronavirus containment aren’t clear by its September Q2 earnings timeframe, it’s likely SIRI’s stock is going to see a continued drop when results confirm palpable reality.

Sirius XM Stock Fared Worse During The 2008 Downturn

But SIRI stock witnessed something far worse during the 2008 downturn. SIRI’s stock declined from levels of around $3 in October 2007 (the pre-crisis peak) to roughly 15 cents in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 95% of its value from its approximate pre-crisis peak. This marked a much higher drop than the broader S&P, which fell by about 51%.

However, SIRI’s stock recovered post the 2008 crisis, to levels of about 57 cents in early 2010, rising by 280% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will Sirius XM’s Stock Recover Similarly From The Current Crisis?

It should be noted that SIRI’s stock fell 38% from the market peak on February 19 to the low on March 23 compared to the 95% decline during the 2008 recession. Also, since it has recovered almost 16% over recent weeks – we believe it can potentially recover by another 20% to over $6 once economic conditions begin to show signs of improving. This marks an almost full recovery back to the $7 level SIRI stock was at before the coronavirus outbreak gained global momentum.

We also compared the trend in Amazon’s Stock over recent months with the 2008 crisis.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting U.S. COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak’s impact on a diverse set of SIRI’s multinational peers including Roku and ViacomCBS. The complete set of coronavirus impact and timing analyses is available here.

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