It's been a long time since Sirius XM Radio (SIRI) excited investors. The satellite radio provider was a wealth-altering investment to those lucky enough to buy in early 2009 when it teetered on the brink of bankruptcy -- bottoming out at $0.05 a share. They're sitting on a 124-bagger if they nailed the bottom. Anyone who has bought into the media giant over the past two years hasn't been as fortunate.
An impressive streak ended in 2020. Sirius XM delivered 11 consecutive years of positive returns, a remarkable feat on many levels. It proved mortal with a 10% slide in 2020. If it wasn't for its small but growing quarterly dividend it would've slipped in 2021. Streaks are relative, of course. Sirius XM has delivered positive gains in 12 of the past 13 years, but it's trading lower than where it was two years ago. Sirius XM reports fresh financials on Tuesday morning. A strong report can get the shares moving again in the right direction.
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Turning the dial
Growth has slowed for Sirius XM over the years. The subscriber count inches higher, but the heady go-go days are gone in terms of significant account and revenue gains. Investors used to see new car sales as a source of free satellite radio trial subscriptions, but now it's just a matter of an existing Sirius XM user porting over an old account to a new vehicle. Outside of 2019 -- when the Pandora acquisition created a spike in sales -- it's been single-digit and typically decelerating top-line gains every year since 2015.
Analysts aren't holding out for much when Sirius XM reports before the market's opening bell on Tuesday. They see revenue climbing 2.6% to $2.25 billion for the final three months of 2021, and the satellite radio operator's profit is expected to match the $0.07 a share it posted for the same quarter a year earlier.
Wall Street pros see more of the same in 2022. Analysts see annual revenue and earnings per share climbing 3% and 6% this year.
Growth investors who once chased Sirius XM as a penny stock have moved on. This is now a steady producer trading at valuable top- and bottom-line multiples. There's also a modest distribution for income investors, but Sirius XM has already mastered that game. It has boosted its payouts five years in a row since initiating a distribution policy. The most recent hike was a 50% increase, pushing the stock's current yield to 1.4%.
There may not be a lot of catalysts at Sirius XM to justify multiple expansion. It has already made acquisitions in the past to have some skin in everything from streaming with deals for Pandora and Stitcher, to telematics when it paid $530 million for Agero's connected vehicle services business. Slow yet steady organic growth will be the beating drum here.
It's not exactly titillating, but Sirius XM has established itself as one of the more reliable and consistent media stocks on the market. The tune can change, and it might start with guidance on Tuesday. With drivers on the road again it wouldn't be a surprise if churn is improving and former subscribers are coming back even if overall car sales haven't been very strong.
Surprise us, Sirius XM. Surprise us in a good way.
