Every winning streak has to end. Now Sirius XM Holdings (SIRI) investors have to wonder if the country's lone provider of satellite radio can turn things around in 2021. Shares of Sirius XM bucked the market's ascent last year, sliding 9% on a dividend-adjusted basis. Last year's move is notable largely because the radio king of all media stocks had delivered 11 consecutive years of positive returns before that.
A strong financial report is a good way to get the shares moving in the right direction, and that brings us to Tuesday morning's fourth-quarter results. Sirius XM's encouraging report suggests that 2020 wasn't as awful as its streak-busting chart may lead one to believe. Sirius XM managed to grow its business for the most part in a challenging year, and that's important given the headwinds early last year facing the auto industry in general but the satellite radio provider in particular.
Image source: Sirius XM Holdings.
Turning the dial to the past
Sizing up all of 2020 may seem like a scary proposition. With cars sitting idle for large chunks of time as we worked, schooled, and entertained ourselves at home, it's easy to see why a lot of people would just flat-out cancel their Sirius XM subscriptions. The early stages of a recession also made premium radio memberships an easy nix in the new normal. We also weren't really interested in buying new cars when we weren't wearing down our old cars, and vehicle purchases are the lifeblood of new satellite radio subscriptions.
When the past year steps on the scale there was modest growth -- but growth nonetheless -- everywhere you look. There are even some pockets of improving efficiency for Sirius XM's.
- Sirius XM grew its self-pay subscriber count by 909,000 in 2020.
- Revenue rose 3% to $8.04 billion as declining ad revenue at Pandora as well as Sirius XM's flagship satellite radio platform were more than offset by small upticks in premium users and average revenue per user.
- Net income, excluding non-cash impairment charges, rose to $0.25 a share from $0.20 a share in 2019.
- Adjusted EBITDA rose 6% to hit a record $2.58 billion.
- Monthly churn of 1.7% for all of 2020 represents the fourth consecutive year of improvement on that front.
Turning the dial to the future
Sirius XM's initial read of the year ahead is a mixed bag. It expects to close out 2021 with 800,000 more self-pay subscribers than it has right now. It sees revenue growth accelerating to 4% with its $8.35 billion forecast. However, its guidance calls for adjusted EBITDA of $2.575 billion, which is exactly where it landed in 2020. The "approximately" $1.6 billion in free cash flow that it's modeling for 2016 could be just shy of the $1.66 billion it delivered on that front in 2020.
Is this going to be enough to get the stock moving higher again? An important caveat in all of this is that Sirius XM announced some of its full-year financial metrics and initiated its 2021 guidance four weeks ago. The stock was still trading slightly lower year-to-date as of Monday's close, so it's going to take some more good news to keep the good times rolling. Signing Howard Stern to a five-year extension in December wasn't enough to lift the shares higher for all of 2020. Investors now expect more out of the media bellwether. It's starting off 2021 on the right foot, but it's going to have to take a few more steps in the positive direction to win back the market.
