Sirius XM Earnings: Signs of Subscriber Stabilization, but Revenue Weakness Persists

Key Morningstar Metrics for Sirius XM Holdings

• Fair Value Estimate: $30.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Sirius XM Holdings’ Earnings

Sirius XM SIRI is undertaking several initiatives to drive subscribers back to its service, and the company saw encouraging results on that front in the third quarter. Monetization is different, with the firm’s revenue decline accelerating and management reducing its full-year outlook. We believe growing subscribers while offering attractive prices will remain Sirius XM’s primary challenge. It faces competition from streaming music providers and has no discernible moat to give it an edge without competing on price and paying up for content rights. We maintain our fair value estimate of $30 per share.

Total revenue declined more than 4% year over year, the weakest quarter in more than four years. Total subscription revenue across segments declined 5%, due mostly to SiriusXM and Pandora shedding subscribers over the past year. Total ad revenue declined 2%, with soft pricing resulting from growing inventory on the market from video streaming providers.

The firm added 14,000 self-pay SiriusXM subscribers in the quarter after losing more than 450,000 during the first half of 2024. We believe this stabilization can hold, as the introduction of the lower-priced app-only service, a different membership structure offered by some automakers, and skinnier car-based choices can make a SiriusXM subscription more appealing. However, we expect the trade-off will be some cannibalization of higher-priced subscriptions. Average revenue per subscriber declined 3.5% year over year, attributable to lower subscription revenue.

We still believe advertising is an area of opportunity for Sirius XM. It has built up its licensing rights to popular podcasts which it plans to monetize across third-party platforms. It is enhancing ad-targeting capabilities with its new satellite radios. Finally, it is experimenting with additional ad-supported offerings. However, most of these enhanced opportunities will build slowly over several years.