Sirius XM Holdings (SIRI)
$Sirius XM(SIRI)$
A decade ago, Sirius XM Holdings (NASDAQ:SIRI) wasn’t that good of an investment. However, the business has improved since then.
Sirius investors only gained a 19% total return over the past ten years. The S&P 500 tripled in value in that time frame while the Nasdaq 100 grew five-fold.
So why buy Sirius now? Shares are down 30% YTD on fears of ad revenue drying up and a recession taking a toll on new vehicle sales.
First, the automotive industry is coming out of its slump from Covid19 pandemic. New car sales surged 15% higher in August year over year, which should increase new subscription sales where they actually makes most of its money. Q2 revenue was $2.25 billion with subscriptions accounting for $1.73 billion worth. Most of Sirius’ ad revenue came from the music streaming service Pandora that it acquired four years ago.
Most importantly, SIRI still produces a lot of cash. Management forecasts it will end the year with $1.2 billion of free cash flow.
The stock trades at just 12 times next year’s earnings estimates, less than twice its sales, and a deeply discounted 12 times FCF.Yet over the past decade, it solidified its finances and now offers an attractive valuation.
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