We're just a few days away from Sirius XM Radio's (SIRI -1.59%) quarterly report, and the battlefield it's on is a pretty colorful place. The stock is trading above $5, and you have to go all the way back to 2006 to find the last time Sirius XM shares were trading this high at the time of a quarterly report.
Thursday morning's report is going to attract a lot of attention, and not just because Sirius XM routinely is one of the most actively traded and heavily shorted stocks. This week's report will be the first with everyone knowing that Berkshire Hathaway (BRK.A 0.36%) (BRK.B 0.21%) has a stake in the satellite-radio monopoly. Berkshire Hathaway initiated a position in Sirius XM late last year, but the filing making that news public didn't go out until after Sirius XM's fourth-quarter results were posted in early February.
Image source: Sirius XM Radio. http://blog.siriusxm.com/2015/02/13/jenny-mccarthys-5-tips-for-single-women/
Around the dial
Sirius XM has been a steady grower in recent years, no doubt a trait that made it attractive to Berkshire Hathaway. It's been posting revenue growth in the high-single or preteen digits for years. However, this would be the weakest year-over-year growth at Sirius XM since late 2011 if it lands where the analysts are parked. Wall Street's pros see a profit of $0.04 a share, just ahead of the $0.03 it recorded a year earlier, along with 7.7% revenue growth to $1.29 billion.
Of course, the market won't limit its reaction on Thursday to what happens on both ends of the income statement. Sirius XM closed out 2016 with 31.3 million subscribers and is targeting 1.3 million net additions in self-pay subscribers for all of 2017, so it will be interesting to see how much progress it's making on that front.
Sirius XM also routinely bumps its outlook higher. Back in early February, it was forecasting $5.3 billion in revenue, $2.025 billion in adjusted EBITDA, and $1.5 billion in free cash flow for the entire year. Investors will want to see if it tweaks one, if not all, of those metrics higher on Thursday.
Not everyone is convinced that Sirius XM is in a good place. There were 261.7 million shares of Sirius XM sold short at the end of March, and Benjamin Swinburne at Morgan Stanley downgraded the stock last week, taking his rating from "equal weight" to "underweight." With growth slowing and Sirius XM maturing, Swinburne thinks the stock is overvalued. Sirius XM lives and dies in the hands of driving commuters, and the analyst thinks new-car turnover is no longer adding materially to the account base as buyers of new automobiles are simply trading in cars that already have receivers. The timing of the downgrade isn't welcome news so close to earnings, but it's probably by design.
Sirius XM, Berkshire Hathaway, and even income investors interested in the latest dividend news will be watching on Thursday. Sirius XM knows how to draw a crowd.
