Sirius XM: Guidance Reaffirmed, Shares Not Cheap (NASDAQ:SIRI)

Are space stocks about to rocket higher? The Procure Space ETF (UFO) recently lifted off to fresh highs since August as it outpaces the S&P 500 ETF (SPY) by more than 5 percentage points in the last month or so. The speculative market niche houses satellite stocks, including one popular trading name.

But is Sirius XM a buy given mixed earnings growth in recent periods and some bearish headlines related to the company’s workforce? Let’s open the hatch and turn up our volumes on Sirius XM Holdings (NASDAQ:SIRI).

Unexpected Leadership: Space Equities?

According to Bank of America Global Research, Sirius XM is a satellite radio operator serving the US market with more than 140 channels of music and talk programming. The company provides services for a monthly subscription fee and currently has over 34mn subscribers. The company also owns Pandora, an audio-streaming business with roughly 50mn active users.

The New York-based $23.2 billion market cap Media industry company within the Communication Services sector trades at a near-market trailing 12-month GAAP price-to-earnings ratio of 20.4 and pays a yield also about on par with the S&P 500, near 1.6%, according to The Wall Street Journal.

SIRI maintained its financial guidance last summer, but shares have merely traded sideways. Unsettling news came in December when news of possible staff cuts crossed the wires (though sometimes that can be a bullish stock catalyst). Citi also downgraded shares then. Before that, Sirius reaffirmed guidance in its Q3 earnings report along with hitting analysts’ top and bottom-line estimates.

On valuation, analysts at BofA see earnings having fallen nearly 10% in 2022, but then resuming an uptrend in the black this year. Per-share profits are seen as jumping above the 2021 near-term high-water mark and then continuing higher in 2024. The Bloomberg consensus forecast is even with what BofA expects. Assuming that EPS trajectory, both SIRI’s operating and GAAP P/Es should retreat further while the dividend yield remains modest.

What’s encouraging is that the firm is solidly free cash flow positive, but it trades at a forward PEG ratio that is high compared to its industry and the company’s 5-year average. So, the valuation is not as strong as what I saw last summer. Let’s look to the charts to get a read on where to be positioned in SIRI.

Sirius: Earnings, Valuation, Dividend Forecasts

Looking ahead, corporate event data from Wall Street Horizon show a confirmed Q4 2022 earnings date of Thursday, February 2 BMO with a conference call immediately after results cross the wires. You can listen live here.

Corporate Event Calendar

The Technical Take

While I no longer like SIRI’s valuation, I see opportunities with the price chart for swing traders. And even long-term fundamental investors likely know what I am getting at in terms of chart pattern analysis. Notice in the graph below that shares have bounced off key support in the mid to high $5s. The high end of the range does not come into play until up around $7. Thus, being long here, targeting $6.80 or so with a stop under $5.50 is a decent-looking risk/reward play.

What I will be keeping an eye on is any change in momentum. The RSI at the top of the chart has been consistent in the 40 to 60 range – a breakout or breakdown from that zone could lead price action. Finally, it’s interesting to see that volume has been on the decline somewhat – once again, a volume thrust could give clues on where SIRI goes in the coming months. Overall, I am a short-term buy, long-term hold on the stock.

SIRI: Confined Trading Range and Momentum, Eyeing Volume Trends

The Bottom Line

With a fair to slightly premium valuation and low yield, I’m no longer as sanguine on SIRI, but the chart once again presents opportunities.