Morningstar

Sirius XM Earnings: Subscriptions Have Improved, but Off-Platform Wins Offer Hope of Durable Stability

Despite its recent appreciation, we think Sirius stock is still priced for a long-term decline.

A view inside SiriusXM Studios.
Noam Galai via Getty
Securities in This Article
Sirius XM Holdings Inc
(SIRI)

Key Morningstar Metrics for Sirius XM Holdings

  • Fair Value Estimate
    : $31.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : High

What We Thought of Sirius XM Holdings’ Earnings

Sirius XM’s SIRI first-quarter sales grew 1% year over year, marking the best quarter on the top line since 2022. Much-improved subscriber losses and positive pricing trends led to the result. Off-platform ad revenue growth is accelerating and becoming material to results.

Why it matters: Despite vast improvement, we don’t believe revenue from the SiriusXM platform can grow over the long term, given the competition. However, outside its own platforms, the firm continues to improve monetization of its podcasts and add partners’ inventory to its advertising exchange.

  • Podcast ad revenue grew 37% year over year. We estimate that total off-platform ad revenue grew nearly 24% and made up about 9% of total Sirius XM revenue during the quarter. Recent partnerships lead us to believe that off-platform can maintain this level of growth over the next couple of years.
  • Sirius’ recently announced partnership with YouTube to exclusively sell YouTube’s audio inventory on that platform in the United States will commence in the fall. We expect this to boost advertising growth, but deals like this should weigh on margins.

The bottom line: We maintain our $31 fair value estimate. Despite its recent appreciation, we think the stock is still priced for a long-term decline, while we believe sales and profits will generally be flat, with ongoing declines at SiriusXM and Pandora offset by off-platform opportunities.

  • During the quarter, the firm lost 111,000 paying SiriusXM subscribers. However, plan adjustments over the past year, including February price increases, have stabilized average revenue per user, which was up 1%.
  • Total segment revenue at SiriusXM was up 0.6%. However, we don’t think the firm can maintain a stable subscriber base and keep raising prices in the long term, considering the competition for audio subscription plans and Sirius’ lack of a moat to provide an advantage in securing proprietary content.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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