Why Sirius XM Shares Are Down 7% Today

Sirius XM Holdings (SIRI) Shares were down 7.2% at 10:15 a.m. ET Tuesday after the company updated investors on its financial outlook.

On Tuesday morning, management announced that Sirius has completed its merger with Liberty Media’s Sirius XM tracking stock in a long-awaited reverse stock split. It boasted that its new and improved “simplified capital structure” gives it “a clear path forward”. Unfortunately, Wall Street decided that the path for Sirius’ stock price was down.

What Sirius promised investors

Is that correct? Consider the guidance numbers Sirius released on Tuesday:

• Revenue for fiscal 2024 will be about $8.75 billion, unchanged from previous estimates.
• Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) should be about $2.7 billion — also in line with previous expectations.
• Best of all, Sirius says it will generate about $1 billion in free cash flow this year.

So far, so good, except… Wait. What? It seems to be correct There seems to be why Sirius stock is tumbling.

Five months ago, when it provided guidance for 2024 as part of its first-quarter report, Sirius XM told investors to expect $8.75 billion in sales, $2.7 billion in EBITDA… and 1 .2 billion in free cash flow. So the big reveal Tuesday morning wasn’t so much that Sirius completed its merger or that most of its guidance was unchanged, but rather that there was a major change in guidance: Sirius will generate 200 million dollars less money this year than this. previously promised.

Is Sirius stock a buy?

As the company now boasts a market cap of just under $10 billion and generates $1 billion a year in free cash flow (and pegged by investors for an annualized earnings growth rate of around 10% over the long term ), shares look fairly valued. In that light, Tuesday’s selloff in Sirius stock could provide investors with a buying opportunity.

Factor in management’s promise to continue dividend payments of about 4.3% annually and buy back $1.2 billion in shares, and the case for buying Sirius stock grows stronger.