Sirius XM Earnings: Similar Weak Trends, but Modest Spots of Improvement

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 saw areas of improvement but still reported third-quarter sales and profit declines along with subscriber losses. Advertising remained a bright spot, and free cash flow was good and is set for growth acceleration. Management also said it was looking to unlock value in its spectrum assets.

Why it matters: We don’t see Sirius XM as a growth business, and we expect its legacy businesses to continually decline. However, success in podcasts and ad revenue more generally should keep the top line relatively stable, and the stock has looked too cheap, considering the cash Sirius generates.

• Podcast revenue was up 50% year over year. We estimate total ad revenue outside of Sirius XM’s platforms, consisting mostly of podcast revenue, was up 25% and made up almost 9% of total revenue.
• After generating $257 million in free cash during the third quarter, management’s full-year free cash flow outlook is now for more than $1.2 billion, about 20% growth. Sirius is in a satellite investment cycle. As that winds down over the next two years, we project double-digit growth to continue.

The bottom line: We maintain our $30 fair value estimate, leaving shares undervalued even after Oct. 30’s 10% rise. The stock is trading at 5 times our 2026 free cash flow estimate, and even after the heightened cash flow growth over the next two years, we don’t expect financials to deteriorate.

• We don’t assign Sirius a moat and expect subscribers and realized subscription pricing to remain under pressure. However, we believe the advertising opportunities associated with the firm’s leading portfolio of podcasts will result in total sales and profits remaining stable long term.
• Sirius continues enhancing its advertising infrastructure. It has now integrated Amazon’s platform to enable programmatic buying across content types and platforms, and it has expanded inventory while also realizing higher ad pricing. Including its podcasts, the firm has 170 million monthly listeners.