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Why Is Sirius XM (SIRI) Down 4.7% Since Last Earnings Report?

A month has gone by since the last earnings report for Sirius XM (SIRI). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sirius XM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Sirius XM Q4 Earnings Beat, Subscriber Revenues Up Y/Y

Sirius XM Holdings reported fourth-quarter 2020 earnings of 7 cents per share that beat the Zacks Consensus Estimate by 40% and also increased by the same percentage year over year.

Total revenues on a reported basis increased 6.2% year over year to $2.19 billion. The figure beat the consensus mark by 5.7%. On a pro-forma basis, revenues also increased 6.2% year over year.

Subscriber revenues (73.8% of total revenues) rose 2.9% from the year-ago quarter to $1.62 billion.

Meanwhile, advertisement revenues (21.7%) increased 17.6% year over year to $474 million. Equipment revenues (2.7% of total revenues) surged 30.4% year over year to $60 million.

Other revenues (1.8% of total revenues) decreased 9.1% from the year-ago quarter to $40 million.

Sirius XM Standalone Details

Sirius XM segment pro-forma revenues were $1.63 billion, up 2.4% year over year. While the subscriber base declined 0.6%, the company witnessed growth of 2.1% in ARPU, which was $14.33.

Self-pay subscribers increased 3% year over year to 30.89 million. The company added 279K net self-pay subscribers in the reported quarter.

Total subscribers were 34.71 million at the end of fourth-quarter 2020, less than 34.91 million at the end of fourth-quarter 2019.

Sirius XM traffic users stayed at 9.301 million. However, Canada subscribers decreased 3% to 2.622 million.

Additionally, average self-pay monthly churn rate was 1.6% in the fourth quarter, down 10 basis points (bps) year over year.

Subscriber revenues rose 2.6% year over year to $1.49 billion. Moreover, Equipment revenues increased 30.4% year over year to $60 million.

However, advertising revenues were $49 million, down 12.5% year over year. Other revenues declined 13% year over year to $40 million.

Pandora Details

Pandora’s pro-forma revenues increased 17.1% year over year to $555 million owing to 22.1% growth in advertising revenues, which totaled $425 million. Subscriber revenues climbed 3.2% year over year to $130 million.

The growth in ad revenues was due to increase in fourth-quarter monetization to $112.71 per thousand hours, up 19.2% year over year.

However, ARPU decreased 1.3% year over year to $6.67.

Monthly active users were 58.88 million at the end of the reported quarter, down from 63.51 million in the year-ago quarter. Ad-supported listener hours declined 7.8% year over year to 2.96 billion.

Pandora exited the fourth quarter with 6.341 million self-pay subscribers, up 2% year over year.

Operating Details

In the fourth quarter, total operating expenses increased 61.9% year over year to $2.69 billion.

Revenue share and royalty costs were up 9.1% year over year to $662 million. Programming & content costs were $130 million, up 4.8%. Cost of equipment declined 33.3% year over year to $6 million.

Customer service & billing costs declined 0.8% year over yearat $122 million. Transmission costs declined 9.4% year over year to $48 million.

Subscriber acquisition costs decreased 7.9% year over year to $105 million. General and administrative costs increased 6.2% to $154 million.

Engineering, design and development expenses decreased 9.5% from the year-ago quarter to $67 million. Sales and marketing expenses increased 1.4% to $293 million.

Adjusted EBITDA increased 12.4% year over year to $660 million.

Balance Sheet

As of Dec 31, 2020, cash and cash equivalents were $71 million compared with $44 million as of Sep 30, 2020. The company had $1.749 billion available for future borrowing under its revolving credit facility.

Long-term debt, as of Sep 30, 2020, was $8.5 billion compared with $7.85 billion as of Sep 30, 2020.

At the end of the fourth quarter, Sirius XM’s net debt to trailing 12-month adjusted EBITDA ratio was 3.3 times.

2021 Guidance

Revenues are expected to be $8.35 billion. Adjusted EBITDA is expected to be $2.575 billion.

The company anticipates adding almost 800K Sirius XM self-pay net subscribers in 2021.

Free cash flow is expected to be $1.6 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.69% due to these changes.

VGM Scores

At this time, Sirius XM has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Sirius XM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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