SiriusXM Bearish Analyst Highlights Key Near Term Challenges

On Friday, BofA analyst Jessica Reif Ehrlich reiterated an Underperform on Sirius XM Holdings SIRI with a price target of $21.

Sirius XM is focused on overcoming several near-term challenges, some within and some outside of its control, as well as a period of elevated capex and leverage, with the aim of generating $1.5 billion in free cash flow for 2027.

Subscriber churn has stayed historically low in recent years, and Sirius XM has been focused on new pricing and packaging offers to improve value further.

Also Read: Sirius XM Q4 Earnings Beats Estimates, CEO Highlights Focus On In-Car Subscriptions, Ad-Supported Growth

Meanwhile, one-time headwinds will pressure subscribers in 2025. Notably, auto tariffs may not have a significant impact as Sirius XM’s trial funnel now includes ~50% used cars and is seeing expanded penetration of EVs.

While still early, Reif Ehrlich noted the recently introduced price increase has been well received and is not driving elevated churn above the normal course.

Reif Ehrlich noted that general economic uncertainty and concerns around the consumer have impacted advertising sales (with CPG, retail, and travel softening).

Specifically, January advertising sales appeared stable, with softness emerging in late February and March, although programmatic has seen typical end-of-quarter strengthening.

Sirius XM’s podcasting portfolio will help reduce the impact of possible broader advertising weakness. Sirius XM is making considerable effort to re-ignite subgrowth, including utilizing new pricing/packaging as a retention tool.

Additionally, Sirius XM is introducing a post-trial extension tied to recently launched new price points, which improves onboarding and pricing transparency. Later this year, Sirius XM will introduce a lower-priced subscription package containing advertising.

The current 40-channel free access offering being trialed with some OEMs will likely continue as it provides an opportunity to upsell and offers some advertising upside. Each of these efforts is also being utilized to reduce promotional discounting.

For the first quarter, Reif Ehrlich maintained her revenue and EBITDA estimates of $2.05 billion and $606 million, respectively. The analyst increased the first-quarter capex to $205 million (versus $174 million). As a result, the new first-quarter free cash flow estimate is $100 million, although her full-year 2025 free cash flow of $1.149 billion remains in line with company guidance of ~$1.15 billion.

Financially, for 2025, Reif Ehrlich now forecasts revenue of ~$8.5 billion (versus $8.523 billion previously). The new EBITDA forecast is $2.608 billion (versus $2.627 billion) due mainly to the reduction in Pandora advertising.

Price Action: SIRI stock is down 5.42% at $22.53 at the last check on Friday.

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