Sirius XM: Buy, Sell, or Hold? | The Motley Fool (2024)

Sirius XM is cheap, but there's a reason for that.

There's a lot of variety when you go channel surfing through the offerings on Sirius XM Holdings' (SIRI -5.17%) satellite radio platform. The same can be said about opinions on the stock itself. Sirius XM has gone from a speculative and volatile penny stock 15 years ago to a steady and profitable media powerhouse.

It doesn't mean that investors have been rewarded through the transformation. Despite the platform's success -- serving 33 million subscribers right now -- the stock has shed half of its value over the past five years. It's one of this year's biggest losers, but will it stay that way? Let's take a look at the reasons to buy, sell, or hold Sirius XM.

Buy Sirius XM

It's hard to live in the shadow of the battleground stock it was ages ago, but the situation today is considerably kinder than it was when regulators dragging their feet on approving the combination of Sirius and XM nearly bankrupted the upstart. Sirius XM is a company consistently generating annual 10-figure free cash flow for the last few years.

The best bullish argument for Sirius XM right now is its value. In a world where traditional media companies are struggling to stay afloat, spending money they don't have on digital initiatives, or leveraged to the point of unprofitability in a sluggish ad market, Sirius XM is cheap. It's trading for less than 10 times trailing earnings. The earnings multiple is a still reasonable 16 if you go by Sirius XM's bloated enterprise value.

There are growth challenges, but Sirius XM is going to extraordinary measures to return money to its shareholders. It's been aggressively buying back shares, reducing its share count by nearly 40% since its peak a dozen years ago. It's also returning money to its shareholders through a dividend that has risen every year since initiating a payout policy in 2016. Its depressed share price this year finds Sirius XM yielding a double-take-worthy 3.4%.

Finally there's the Warren Buffett angle. Berkshire Hathawayhad a 36.7 million share stake in Sirius XM earlier this year. It nearly quadrupled that stake to 132.9 million shares in the second quarter. Buffett believes in a stock that is down 42% this year? I think I may have buried the lede.

Sirius XM: Buy, Sell, or Hold? | The Motley Fool (1)

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Sell Sirius XM

A stock wouldn't be as cheap as Sirius XM if it didn't have problems, and there are some legit reasons to steer clear of the satellite radio monopoly. Let's start with growth, or what is now a lack of growth. Organic revenue increases have been in the single digits since 2015, and last year those single-digit top-line moves turned negative.

Satellite radio has a problem. Younger drivers are gravitating to streaming apps in their connected cars, slowing the pace of new subscribers. Churn is in check as longtime subscribers are sticking around, but the historically low cancellation rate is no match for the thinning pipeline of new trail subscriptions. Sirius XM has 618,000 fewer subs than it had at the start of this year.

There's another reason to worry about Sirius XM beyond the slow fade out of its business. Media mogul John Malone owns a controlling stake in Sirius XM. It currently trades as Liberty Sirius XM Grouptracking shares. Last week Malone's shareholders approved a plan to combine his discounted tracking shares with the more widely traded Sirius XM common stock. The transaction is expected to go into effect after the close of trading on Sept. 9.

What's so bad about the transaction? Well, some investors who own Liberty Sirius XM Group as a discounted way to play Sirius XM may cash out starting Sept. 10. The selling could be short-lived, but it's one more potential concern for bulls of the out-of-favor media stock.

Hold Sirius XM

There are some negatives to the positives. The buybacks are improving profitability on a per-share basis, but Sirius XM paid a lot more for many of those shares over the years than what they are fetching now. The end of Malone's tracking shares in two weeks can lead to a wave of selling, but it could just as well be a dinner bell for the bulls now that the distraction of Liberty Sirius XM Group is no longer weighing down the satellite radio platform's market attention.

The stock is cheap, but it's hard to find a catalyst that can reverse the decelerating revenue growth. Buffett is here, but he also owns a sizable chunk of the tracking shares. What if he joins the potential wave of sellers next month? There are question marks for a company that was once all about exclamation points.

I'm siding with the bulls here. The stock is cheap enough for a potential buyout. If it doesn't get scooped up, an activist investor could have better plans for this cash cow than just buybacks, dividends, and debt repayments. A turnaround could take time, but with healthy yield at least investors are being paid to wait.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Sirius XM: Buy, Sell, or Hold? | The Motley Fool (2024)

FAQs

Sirius XM: Buy, Sell, or Hold? | The Motley Fool? ›

Key Points

Is Sirius XM Holdings a buy or sell? ›

Sirius XM Holdings Inc's analyst rating consensus is a Moderate Buy. This is based on the ratings of 11 Wall Streets Analysts.

What is the outlook for Sirius XM stock? ›

Based on short-term price targets offered by 11 analysts, the average price target for Sirius XM comes to $3.75. The forecasts range from a low of $2.50 to a high of $6.50. The average price target represents an increase of 15.03% from the last closing price of $3.26.

What is the future of Sirius XM stock? ›

Stock Price Forecast

The 11 analysts with 12-month price forecasts for Sirius XM stock have an average target of 3.78, with a low estimate of 2.50 and a high estimate of 6.50. The average target predicts an increase of 21.15% from the current stock price of 3.12.

What is the analyst rating for Sirius XM? ›

Analyst Ratings Sirius XM Holdings Inc.
3 Months AgoCurrent
Buy64
Overweight00
Hold56
Underweight21
2 more rows

What is the stock price forecast for XM? ›

XM Stock 12 Month Forecast

Based on 2 Wall Street analysts offering 12 month price targets for Qualtrics International in the last 3 months. The average price target is $18.15 with a high forecast of $18.15 and a low forecast of $18.15.

What penny stock to buy today? ›

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Is XM a good investment? ›

With a market cap of $14.0 billion, Sirius XM holds a solid position in the mid-cap arena. Moreover, the company boasts a generous dividend yield of 2.9%, which is music to any income-focused investor's ears.

Is Jimmy Buffett on SiriusXM? ›

Hear the performance LIVE on SiriusXM's Radio Margaritaville (Ch. 24) and No Shoes Radio (Ch. 57) starting 7:45 pm ET/4:45 pm PT.

Has SiriusXM ever made a profit? ›

Sirius XM Holdings gross profit for the twelve months ending June 30, 2024 was $4.715B, a 1.32% decline year-over-year. Sirius XM Holdings annual gross profit for 2023 was $4.744B, a 2.65% decline from 2022. Sirius XM Holdings annual gross profit for 2022 was $4.873B, a 3.07% increase from 2021.

Is Sirius a good investment? ›

Valuation metrics show that Sirius XM Holdings Inc. may be undervalued. Its Value Score of A indicates it would be a good pick for value investors. The financial health and growth prospects of SIRI, demonstrate its potential to outperform the market.

Why buy SiriusXM? ›

A Huge Variety Of Programming

SiriusXM offers all kinds of channels. They range from live sporting events to talk radio to an incredible variety of music genres. You have access to only a handful of stations via local radio, but with SiriusXM you can choose between more than 150 channels in your car.

Is SiriusXM in debt? ›

Total debt on the balance sheet as of June 2024 : $9.39 B

According to Sirius XM's latest financial reports the company's total debt is $9.39 B. A company's total debt is the sum of all current and non-current debts.

How successful is SiriusXM? ›

The company recorded net income of $265 million in the first quarter of 2024 compared to $233 million in the prior year's quarter. Net income per diluted common share was $0.07 in the first quarter of 2024 compared to $0.06 in the first quarter of 2023.

What is the most listened to SiriusXM channel? ›

Here are the ten most popular SiriusXM stations:
  • The Coffee House (Acoustic/Folk): This channel featured acoustic and folk music, creating a relaxed and mellow atmosphere.
  • NPR Now (News/Talk): NPR Now offers a range of programming from National Public Radio, including news, talk shows, and features.
Aug 29, 2023

What is Sirius XM Holdings credit rating? ›

S&P Global Ratings affirmed the "BB" Foreign Currency LT credit rating of Sirius XM Holdings on December 14, 2023. Sirius XM Holdings Inc.

Who are the major shareholders of Sirius real estate? ›

Major shareholders
Shares% of issued share capital
BlackRock, Inc.157,193,64510.40
abrdn plc117,420,3117.77
Public Investment Corporation (PIC)81,018,4145.36
Vanguard Group73,112,3784.84
1 more row
Jul 26, 2024

What is the market analysis for Sirius XM? ›

What are analysts forecasts for Sirius XM stock? The 49 analysts offering price forecasts for Sirius XM have a median target of 4.92, with a high estimate of 7.70 and a low estimate of 2.50. The median estimate represents a 65.02 difference from the last price of 3.20.

Why buy Sirius XM? ›

A Huge Variety Of Programming

SiriusXM offers all kinds of channels. They range from live sporting events to talk radio to an incredible variety of music genres. You have access to only a handful of stations via local radio, but with SiriusXM you can choose between more than 150 channels in your car.

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