Sirius XM Earnings: Encouraging Subscriber Metrics Don’t Offset Continuing Revenue Contraction

Key Morningstar Metrics for Sirius XM Holdings

• Fair Value Estimate: $30.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Sirius XM Holdings’ Earnings

Sirius XM Holdings’ SIRI revenue again declined at a mid-single-digit clip in the fourth quarter. The firm grew its SiriusXM subscriber base for the first time in six quarters, but average revenue per user continues to drop. Margins were flat as cost savings have been reinvested in the business.

Why it matters: Sirius XM remains in transition as it rolls out lower-priced and streaming subscription tiers. It has an uphill climb to return SiriusXM or Pandora to subscriber growth, but off-platform advertising is a bright spot.

• The firm added 70,000 net SiriusXM subscribers in the quarter, but management expects a sizable decline in early 2025 as it adjusts promotions and offers easier cancellations. Average revenue per SiriusXM subscriber declined 2.2% in 2024 and declined sequentially each quarter during the year.
• Pandora and off-platform revenue declined 0.5% during the fourth quarter, as Pandora lost 101,000 net paying subscribers and monthly active users declined 0.9%. However, we estimate that off-platform ad revenue grew double digits on the firm’s bigger podcasting presence.

The bottom line: We maintain our fair value estimate of $30 per share. We don’t forecast Sirius XM to ever grow, but the firm continues to generate more than $1 billion annually in free cash flow, and capital spending should decline over the next few years as the firm’s recent investment cycle winds down.

• We believe prices for the traditional SiriusXM plan are still too high for the current era of streaming music platforms. We think subscriber stabilization will come with continually declining ARPU, so we expect SiriusXM revenue, which comprises 75% of the company’s total, will continue shrinking.
• The firm expects $200 million in cost savings in 2025, but like the last round, we expect this to be invested back into the business. Fourth-quarter and full-year EBITDA margins were roughly flat versus last year at 31%, and we don’t expect much change in this metric.