3 Reasons Sirius XM Stock May Soar in the Fall

Major market indices may have hit new all-time highs this week, but Sirius XM Holdings (SIR 4.18%) investors weren’t invited to the party: The satellite radio provider’s stock hit a 12-year low this week.

There is no shortage of explanations for the former battleground that lost the war on Wall Street. Growth has slowed to a crawl. Its subscriber base could have settled last year as well.

Making matters worse, the conversion Sirius XM Liberty Group Stock tracking to more widely traded common stocks is a winning move in the long term, but a drag on short-term performance. Sirius XM’s Liberty Group investors selling their shares at a discount previously after the conversion and a 1-for-10 reverse stock split related to the deal hurt Sirius XM this month.

It might be crazy to call it a Monday low, but let’s go over a few reasons why Sirius XM can bounce back this fall.

1. The Fed’s move this week matters

The Federal Reserve cut its target for the federal funds rate by 50 basis points on Wednesday made headlines. The fallout varies from company to company, but Sirius XM is shaping up to be a major beneficiary.

Sirius XM’s monthly subscriptions are reasonable, and most new cars come with factory-installed satellite receivers. Falling borrowing costs might not seem to have much of an impact on business, but let’s talk about the auto market. Sirius XM is primarily consumed in cars, and this is a large purchase that usually requires financing.

Retention remains high for the platform despite the year-to-date decline in total subscribers. Its monthly churn rate of 1.5% is at the lower end of its historical range. The problem here is attracting new subscribers to replace the steady stream of cancellations. One push is new and used car sales may change that dynamic, and lower rates should help boost turnover in the auto market.

Image source: Getty Images.

2. Let’s talk politics

It’s election season, and campaign spending on ads to woo undecided voters will start to heat up. For example, Sinclair announced Thursday that it expects higher-than-expected political revenue for the current quarter. The operator of local TV stations and ad-supported specialty digital channels is now targeting political advertising revenue of $140 million to $145 million for the third quarter, up from a previously estimated range of $113 million to $128 million. That’s an 18% increase.

Sirius XM’s business model is primarily based on monthly subscription fees, but 20% of its revenue comes from the advertising it sells on its ad-supported channels. With 33 million accounts that hold attractive demographic profiles — and are unlikely to spend time consuming traditional ad-supported media — the company should be a major beneficiary of tight political races heading into early November elections .

3. Stock is just plain cheap

Shares of Sirius XM were down 56% in 2024 through Thursday’s close. It’s one of four large-cap stocks that fell more than their value. The business is going through some challenges, but it hasn’t deteriorated that badly.

Sirius XM is now trading for just 7 times trailing earnings. Its yield rose to an all-time high of 4.4%. Analysts see a return to growth on both ends of the profit and loss account next year.

Concerns about the long-term sustainability of satellite radio are real, but there is value in its engaged audience and sticky content. Sirius XM remains an audio media stock trade at a ridiculous price.

Autumn is here. It doesn’t mean that Sirius XM itself has to fall any further.