Satellite and online radio provider Sirius XM (NASDAQ:SIRI) is due to report its Q4 and 2019 full-year earnings on Feb. 4. In the lead up to the big day, the company released revised guidance on Jan. 7 with mixed messages. The new numbers look good for Q4 and 2019, but underwhelming for 2020. That guidance resulted in SIRI stock taking a dip, but it quickly recovered, hitting $7.20 on Jan. 16 — a level SIRI hasn’t touched since June 2018.
Here’s what to expect when Sirius XM reports its Q4 and full-year 2019 earnings.
Sirius XM reported its Q3 earnings last Oct. 31. SIRI beat analyst expectations for earnings per share, but delivered a revenue miss. It’s notable that Sirius XM played up its Pandora numbers, including ad revenue at an all-time high, self-pay net adds of 33,000 and 19% growth in gross profit for the streaming music service. However, a deeper dive shows the MAU (monthly active users) for Pandora continued to drop, down 5.7 million compared to Q3 2018.
The company also issued full-year 2019 guidance at that time, including revenue of $7.85 billion. That was well above Wall Street estimates of $7.64 billion.
What to Expect From Sirius XM Earnings
On Jan. 7, Sirius XM released updated guidance for full-year 2019:
“SiriusXM today announced it added 1.063 million net self-pay subscribers to finish 2019 with approximately 30 million self-pay subscribers, exceeding the company’s initial 2019 subscriber guidance. The company also announced that it expects to meet or exceed its 2019 guidance for revenue, adjusted EBITDA and free cash flow.”
The company also issued full-year guidance for 2020. The key numbers from that were SiriusXM self-pay net subscriber adds of “over 900 thousand” and revenue in the $8.1 billion range.
The 2019 part of the guidance was good news for investors. But the company has put together 10 straight years of adding more than 1 million new subscribers annually. The prospect of that streak being broken in 2020 is worrisome. Slowing growth rates are never a good trend. The $8.1 billion in estimated revenue for 2020 would be just 3.2% annual growth over the projected $7.85 billion for 2019, and would miss analyst expectations.
The market didn’t react positively to the new guidance — especially the 2020 projections — and SIRI stock dipped as a result.
CNN Business polled investment analysts for their forecast on what to expect from SIRI’s earnings call. For Q4, their consensus is for EPS of 5 cents, with $2 billion in revenue. For full-year 2019, they’re looking for EPS of 21 cents, compared to the reported earnings of 26 cents for 2018.
Bottom Line for SIRI Stock
Sirius XM has seen its stock grow steadily over the past decade, moving from penny stock status at the start of 2010 to currently trading above the $7 level. But as InvestorPlace.com contributor Luke Lango points out, Sirius XM subscriber rates are slowing. And its Pandora streaming music service continues to shed subscribers as giants like Spotify (NYSE:SPOT) and Apple’s (NASDAQ:AAPL) Apple Music increasingly dominate the market. With fixed expenses, slowing subscriber growth (negative growth in the case of Pandora) inevitably leads to both slower revenue growth and slower profit growth. That equation points to this decade being less kind to SIRI stock than the past decade was.
That being said, the investment analysts polled by CNN Business still have SIRI as a consensus “buy.” Their median 12-month price target of $7.75 suggests confidence that, for the next year at least, there’s still room for modest growth. Stay tuned to see whether that confidence holds after Sirius XM reports earnings on Feb. 4.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.