There's a lot riding on Sirius XM Holdings (NASDAQ:SIRI) as it heads into its latest financial update this week. The satellite radio provider will serve up its second-quarter results on Tuesday morning, ahead of the market open.
There are a lot of moving parts to this report. For starters, this will be the first full quarter with Pandora under its belt. Sirius XM completed its purchase of the streaming music service at the end of January. Sirius XM shares also stumbled last time out, tumbling 7% the day it posted its first-quarter numbers. It's also worth pointing out that after 10 consecutive years of positive returns that the shares are trading higher in 2019, pushing the streak to 11 years if the gains hold up. A lot can happen in the next five months and change.
Analysts see revenue checking in at a record $1.94 billion, 35% ahead of where it was a year earlier. You have to go back nearly a decade to find the last time that Sirius XM's top line was growing this fast, but unfortunately this week's top-line gains aren't organic. The addition of Pandora's second-quarter performance will pad the period's financials, accounting for the lion's share of the growth.
The combination of Sirius XM with Pandora should pay off in the long run, but it will create some extra volatility in the near term. Wall Street's job of sizing up Sirius XM's numbers got that much more tricky since the merger closed, explaining why analysts underestimated Sirius XM's top- and bottom-line production last time out. There will be some big beats and misses in the coming quarters until analysts get a firm handle on what the combined company is capable of doing on both ends of the income statement.
Investors will also be hanging on to Sirius XM's guidance. It has historically lifted at least some of its guidance metrics, and when it doesn't, it's often a sign that near-term challenges remain. With user growth decelerating, any encouraging trends are always welcome.
Sirius XM is trying to integrate Pandora into its bloodstream quickly. It launched the Pandora NOW channel on its streaming service shortly after the transaction closed, and earlier this month, it beefed up the online content that its satellite radio subscribers can access through online devices at no additional cost. If Sirius XM can offer any comforting words on the transition process, it could get investors excited about the stock. There is never a dull moment when it comes to Sirius XM Holdings, and this week is going to be exciting.