What will happen to Sirius shares after the split?

Sirius XM Holdings (NASDAQ: SIRI), a leading provider of satellite radio, conducted its 10-for-1 stock split on September 9. This means that the company's shareholders received one share for every 10 shares they owned. Investors may view stock splits negatively because they often signal fewer shares and a short-term problem, but they can signal optimism in the long term. It's worth noting that Sirius XM was not in danger of being delisted from the Nasdaq stock exchange. Rather, this move was likely made to boost the company's stock price from the $3-$6 range it has fluctuated in for years to a value that is more likely to attract institutional investors. The company reduced its outstanding share count from well over 3 billion to around 339 million shares. It is worth noting that the total market value of the company remains the same after the stock split because the increase in the share price offsets the decrease in the number of shares.

This is the first stock split in the company's history since the IPO. SIRI stock is currently trading at nearly $26 after the reverse stock split (as of September 12). We have Sirius XM Rating to $29 per share (from $3 previously (pre-reverse split), based on expected earnings per share of $3.07 (post-split) and a P/E ratio of 9.5 for fiscal 2024 – nearly 13% higher than the current market price. We also forecast Sirius XM revenue for fiscal year 2024 at $8.8 billion, down slightly from last year. SIRI stock is down 53% year-to-date. Notably, shares of SIRI competitor Apple are up 16% year-to-date to around $223. SiriusXM (now Sirius XM Holdings) also completed its merger with Liberty Sirius XM Group (Sirius XM tracking stock of Liberty Media) this week.

SIRI stock's rise over the past 3-year period has been anything but consistent, although annual returns have been significantly less volatile than the S&P 500. The stock's returns were 1% in 2021, -3% in 2022, and -4% in 2023. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 every year in the same period.

Why is that? As a group, the HQ Portfolio stocks delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride as shown by the HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could SIRI find itself in a similar situation as it did in 2021 and 2023 and perform worse than the S&P in the next 12 months – or will there be a sharp jump?

SIRI's revenue growth fell 3% year-over-year to $2.2 billion in the second quarter of 2024. Net income for the second quarter of 2024 was $316 million, resulting in diluted earnings per share of $0.08, compared to $310 million in the same quarter of 2023. Under its namesake business unit, the company had 33 million self-pay subscribers, while the number of self-pay subscribers declined by 100,000 over the same period. Self-pay subscriber churn was 1.5%, and segment revenue of $1.6 billion declined 5% year-over-year, reflecting a smaller average base of self-pay subscribers and a $0.42 decline in average revenue per user in the second quarter. In the Pandora and Off-Platform business, the company had 6 million self-pay subscribers and lost 41,000 in the second quarter. Segment revenue increased 2% to $538 million.

For the full year 2024, SIRI expects total revenue of approximately $8.75 billion, adjusted EBITDA of approximately $2.7 billion and free cash flow of $1 billion this year. Sirius XM, of course, suffered a setback due to the pandemic – with a lockdown in workplaces, institutions and family gatherings. Even with the return to normality, the company's business is stagnant, in fact, the company recorded its first ever revenue decline in fiscal 2023. Still, Sirius needs to focus exclusively on its content to keep up with larger and more resourceful competitors and grow its business.

It's helpful to see how the competition is doing. SIRI Peers shows how Sirius stock compares to other companies on key metrics. For more useful comparisons for companies in different industries, see Peer Comparisons.

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