Bullish SiriusXM Analyst Says Auto Market Weakness Will Extend Into 2023

Shares of Sirius XM Holdings Inc SIRI have performed well so far in 2022 despite ongoing weakness in the auto industry. Unfortunately for SiriusXM investors, Bank of America analyst Jessica Reif Ehrlich said Wednesday that auto supply chain issues will continue to persist for quite some time.

Chip Shortage Drags On: Coming into 2022, auto industry analysts were anticipating the chip shortage that has contained production would be alleviated in the second half of 2022. However, Bayerische Motoren Werke ADR BMW management recently said the Russian invasion of Ukraine now likely pushed the chip shortage into 2023.

Related Link: Ukraine War Has Uranium Prices Soaring, Analyst Says Buy This Uranium Producer

"As a result, we are reducing our 2022 self-pay net add estimate to 500k (vs. 578 prev.) – in line with current guidance as we are reducing our 2H22 net add forecasts," Ehrlich said.

Fortunately for SiriusXM investors, Ehrlich said SiriusXM remains well-positioned in the growing audio entertainment industry.

"Despite pressure from auto inventory shortages, SIRI's legacy business remains healthy with churn near historically low levels and still solid conversion rates indicating consumers still see great value in the product," she said.

2022 Outlook: Ehrlich said historically low churn, advertising revenue growth and healthy capital return levels are all bullish catalysts for SiriusXM shares in 2022.

For the first quarter, Ehrlich has reduced her estimate for self-pay net subscriber losses from 114,000 to 65,000. At the same time, she has boosted her first-quarter revenue growth projection from 3.1% growth to 4.3% growth due to a higher average revenue per user outlook.

Bank of America has a Buy rating and $7.50 price target for SiriusXM.

Benzinga's Take: SiriusXM's outperformance in 2022 is even more impressive given the auto industry headwinds the company is navigating. While SiriusXM maintains revenue growth in the near-term, investors can expect a sharp rebound in auto subscribers as soon as auto industry production constraints are eliminated.

Photo: Courtesy of ruthdaniel3444 on Flickr