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On Tuesday, JPMorgan reaffirmed its Underweight rating on Sirius XM Radio (NASDAQ:SIRI), maintaining a $20.00 price target. Currently trading at $23.95, with a market capitalization of $8.1 billion, SIRI has seen a -36% return over the past year. According to InvestingPro analysis, the company appears overvalued at current levels. The firm’s analysis followed recent management conference appearances and updated financial estimates for the satellite radio company.
Sebastiano C. Petti of JPMorgan provided insights into the adjustments made to Sirius XM’s projections. The firm continues to predict a net loss of 500,000 self-pay subscribers for the year, including a loss of 413,000 in the first quarter. This decline is attributed to Sirius XM’s strategic reduction in marketing solely for its streaming services.
For the first quarter, JPMorgan has revised Sirius XM’s revenue forecast slightly downward to $2.05 billion, a 0.6% decrease. This adjustment is based on a dip in advertising revenue, particularly from the retail and consumer packaged goods sectors, amid broader economic uncertainties. Subscriber revenue expectations, however, remain unaltered.
Despite the lower revenue projection, JPMorgan has increased its EBITDA (earnings before interest, taxes, depreciation, and amortization) estimate for the first quarter to $580 million. The improvement is credited to higher margins resulting from cost-saving efforts in selling, general, and administrative expenses, as well as reduced expenditures on streaming marketing. InvestingPro data shows SIRI’s last twelve months EBITDA at $2.44 billion, with a Financial Health Score rated as ’FAIR’. Get access to more detailed financial health metrics and 6 additional exclusive ProTips with an InvestingPro subscription.
The forecast for first-quarter free cash flow (FCF) has been raised to $123 million, benefiting from the higher EBITDA, with capital expenditures remaining largely the same. For the full year, JPMorgan has slightly trimmed its consolidated revenue estimate for Sirius XM to $8.50 billion and anticipates an EBITDA of $2.60 billion, which aligns with the company’s guidance.
Looking ahead, JPMorgan will closely monitor advertising trends at Sirius XM, considering the uncertain economic climate, as well as the average revenue per user (ARPU) as the company implements its new $9.99 modular pricing strategy. The 2025 free cash flow projection remains steady at $1.15 billion, consistent with the company’s guidance.
JPMorgan’s December 2025 price target for Sirius XM is based on a valuation of 6.4 times the estimated 2026 enterprise value to EBITDA and 5.1 times the estimated 2026 free cash flow. The company currently trades at an EV/EBITDA multiple of 7.2x and maintains a notable 4.5% dividend yield, having sustained dividend payments for 10 consecutive years. While currently unprofitable, InvestingPro analysts expect the company to return to profitability this year. Discover comprehensive valuation analysis and more insights in the exclusive Pro Research Report, available for over 1,400 US stocks.
In other recent news, Sirius XM Radio announced its fourth-quarter earnings for 2024, showcasing a significant beat in earnings per share (EPS) with $0.83, surpassing the forecasted $0.08. However, revenue fell slightly short of expectations, coming in at $2.19 billion against the anticipated $2.22 billion. The company reported a full-year revenue of $8.7 billion, slightly above its guidance, with a 26% increase in net income year-over-year to $287 million. Despite these positive earnings, analysts from Rosenblatt Securities and BofA Securities have adjusted their outlooks on Sirius XM. Rosenblatt reduced the company’s stock price target to $24 from $29, maintaining a Neutral rating, while BofA Securities cut the price target to $21 from $23, keeping an Underperform rating. Both firms cited challenges in subscriber growth and revenue decline as key concerns for the upcoming year. Sirius XM is undergoing a strategic shift, focusing on improving its subscriber strategy and projecting modest growth for 2025 with an emphasis on cost savings. The company also highlighted a potential increase in free cash flow despite anticipated declines in revenue and EBITDA for 2025.
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