SiriusXM Faces Headwinds From Pricing Shift, Ad Weakness, Says JPMorgan – Sirius XM Holdings (NASDAQ:SIRI)

JPMorgan analyst Sebastiano Petti reiterated the Underweight rating on SiriusXM Holdings Inc. SIRI on Tuesday, with a price forecast of $20.

The analyst suggests that SiriusXM’s shares are underperforming due to growth challenges driven by demographic changes, a shift toward lower-priced plans and a revamped pricing strategy. These are expected to lead to near-term ARPU “dilution” and margin compression.

Petti has revised Pandora’s ad-supported revenue downward by 2.5%, now expecting it to reach $351 million. This adjustment follows a warning from CFO Thomas D. Barry in early March about weaker retail and consumer packaged goods advertising spend, driven by economic uncertainty and reduced business confidence.

As a result, the analyst has reduced the revenue forecast for the Pandora segment by 3%.

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Despite cost-cutting efforts, the company’s elevated capital expenditures in the near-to-medium term, combined with increased leverage from its, Liberty Sirius acquisition, will likely delay share repurchases until 2027, further weighing on the stock, according to Petti.

The analyst has revised its estimates for SiriusXM following recent management conference appearances.

Petti writes that first-quarter revenue is adjusted to $2.05 billion, reflecting a 0.6% decline due to lower advertising revenue, particularly in retail and consumer packaged goods, amid macroeconomic uncertainty, though subscriber revenue remains unchanged.

However, the first quarter EBITDA is raised to $580 million, benefiting from improved margins through SG&A cost-cutting and reduced streaming marketing expenses.

The analyst also updated the first quarter free cash flow to $123 million, driven by higher EBITDA, with capital expenditures largely unchanged. For the full year, consolidated revenue is trimmed to $8.50 billion with an EBITDA estimate of $2.60 billion, aligning with the company’s guidance of $8.5 billion and $2.6 billion, respectively.

The analyst emphasizes the need to monitor advertising trends and ARPU developments, especially as SiriusXM introduces its new $9.99 modular pricing.

Free cash flow for 2025 remains unchanged at $1.15 billion, in line with prior guidance, the analyst notes.

Price Action: SIRI shares are trading higher by 0.94% to $24.18 at last check Tuesday.

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