Shares of digital radio specialist Sirius XM Radio (SIRI -3.42%) fell 10.9% in calendar year 2020, according to data from S&P Global Market Intelligence. The stock never made a full recovery from the COVID-19 market panic in March.
The stock market as a whole managed to bounce back from the spring's darkest days and post a 16.3% gain for the full year, as measured by the S&P 500 market tracker. Sirius followed the market down but sputtered on the way back up.
The company's financial reports were decent enough, showing stability on both the top and bottom lines throughout 2020. But Sirius XM missed out on the fantastic growth spurts that other digital entertainment experts such as Netflix (NFLX 0.33%) and Spotify (SPOT 0.72%) enjoyed during the same period. Netflix jumped 67% last year while fellow music and podcasts specialist Spotify delivered a soaring 110% return, leaving Sirius XM far behind.
Sirius XM tried to make the most of the coronavirus crisis by offering extended free trials to its satellite radio services in the spring. Consumers just didn't connect with the company's marketing, and the potential for incredible growth was never realized. Moreover, the satellite radio service is tightly tied to car radios, and Americans spent much less time behind the wheel in 2020.
My fellow Motley Fool contributor Rick Munarriz expects Sirius XM to bounce back with a vengeance in 2021. Commuting to work is back and will only increase as the recently approved coronavirus vaccines start to improve the global economy. Therefore, Rick calls Sirius XM a solid buy right now.
I agree with his conclusion that the car-based entertainment market should make a comeback, but I'm less convinced about the value of owning Sirius XM today. In fact, I'm seriously considering cashing in the Sirius shares I got when the company bought Pandora Media (which I owned) two years ago. The company bought online radio expert Pandora in order to boost its long-term growth but ended up writing off $1 billion of Pandora's $3.5 billion purchase price as a goodwill impairment charge.
In plain English, that means Sirius XM is getting less value than it expected from the Pandora deal, and management will have to find other ways to boost the company's stalling growth.
Rick's view of Sirius XM's future is much more optimistic than mine. Be careful with this tricky stock, dear investor.