Morgan Stanley: Sirius XM Growth Almost Certainly Slowing

Shares of Sirius XM Holdings Inc. SIRI were trading lower by nearly 2 percent Wednesday after Benjamin Swinburne of Morgan Stanley downgraded the stock from Equal-Weight to Underweight with an unchanged $4.80 price target.

According to Swinburne, Sirius boasts several impressive traits, including a stable churn and conversion rates. However, based on the company's 2017 guidance, the company's growth is "almost certainly" slowing.

Specifically, one of the most notable bull cases to owning Sirius' stock is the growth in car sales, most of which come equipped with a free trial to Sirius' satellite radio. However, the analyst noted car sales are sitting near historic all-time highs, which likely means conversion rates are unlikely to move materially higher from current levels.

Sirius likely identified this trend when it struck deals with nearly all franchise dealers of used cars, but this doesn't address independent dealers and person-to-person sales.

Bottom line, the analyst stated that macro data hints that both new and used auto sales have "more risk to the downside" than the upside and this will impact Sirius' growth and "likely lead to multiple compression."

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