Sirius XM stock (NASDAQ: SIRI), a leading provider of satellite radio, has a large number of outstanding shares of around 4 billion (in 2021) which makes its stock trade at a low price in the range of $6 to $7 levels. After a 4% fall year-to-date (YTD), we believe SIRI’s short-term stock price is fairly valued at around $6 per share. Sirius stock has declined from $6.30 to $6.10 YTD, negatively impacted by inflation and headwinds in the auto industry. Pandora also continues to struggle to stabilize its MAUs and total listening hours. In addition, the total company remains heavily in debt at $9.8 billion. Despite all this, the media company benefits from a historically meager churn rate, with an implied average life for new car purchases of around five years – thanks to its solid business model. By taking advantage of the advertising reach it receives through radio, Sirius XM could likely push Pandora into podcasting for further growth opportunities. And, if we consider that SIRI stock now trades at 21x forward earnings with operating margins of 22%, the long-term price could see gains.
Sirius Q1 revenue climbed 6% y-o-y to $2.19 billion and earnings per share grew 60% to 8 cents, with strength in the off-platform business complementing its main satellite radio content stream. The company’s hardware was incorporated into about 83% of new vehicles sold in the U.S., up from about 81% in the year-ago period. Also, the enabled fleet grew to nearly 146 million vehicles, up 9% year-over-year. In addition, free cash flow rose about 22% to $258 million, on higher receipts from customers partly offset by bigger satellite capital expenditures.
We have updated our model following the Q1 release. We forecast Sirius XM’s Revenue to be $9.1 billion for the full year 2022, up 4% y-o-y. Looking at the bottom line, we now forecast EPS to come in at $0.31. Given the changes to our revenues and earnings forecast, we have revised our Sirius XM’s Valuation to $6 per share, based on 31 cents expected EPS and a 20.8x P/E multiple for fiscal 2022 – almost 4% higher than the current market price.
Sirius XM has a long history of providing conservative guidance for revenue, self-pay net subscriber additions, free cash flow, and adjusted EBITDA. The satellite radio company typically raises those guidance figures throughout the year as it did throughout 2021. For the full year 2022, Sirius continues to expect self-pay net subscriber additions to grow by approximately 500,000, total revenue of approximately $9 billion, adjusted EBITDA of $2.8 billion, and free cash flow of approximately $1.5 billion.
Listeners can stream exclusive content from Sirius XM’s 360L audio platform. A total of more than 10,000 hours of recorded on-demand content is available here, delivered over an internet data connection. It should be noted that Sirius’ 360L provides it with an advantageous position in the market – thanks to its combination of both satellite and streaming services. It is estimated that 360L is now in over 4 million cars, but only 25% get the modules, showing massive potential for growth in the future.
While SIRI stock looks poised for more gains in the future, it is helpful to see how its peers stack up. Check out how Sirius XM’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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