Sirius XM (NYSE: SIRI) Stock is an Auto Recovery Play

Satellite radio provider Sirius XM Holdings Inc. NASDAQ: SIRI stock was hit hard by the pandemic but shares are creeping back towards it pre-COVID levels. As the restart initiative continues to accelerate with improving auto sales, SiriusXM has the momentum to accelerate its growth with a larger base of out-of-car app users and deeper U.S. auto factory penetration. Shares are still underperforming the benchmark S&P 500 index NYSEARCA: SPY but ready to outperform in 2021 as the groundwork has been laid out. As COVID-19 vaccines near FDA approval, commuters set to hit the roads lends to its core business and the rollout of 5G enables more personalized content as its next-gen 360L platform takes shape. Long-term investors looking for a stable pandemic recovery play can look for opportunistic pullbacks for entry into SIRI shares.

Q3 FY 2020 Earnings Release

On Oct. 22, 2020, SiriusXM released its fiscal third-quarter 2020 results for the quarter ending September 2020. The Company reported an earnings-per-share (EPS) profit of $0.06 excluding non-recurring items versus consensus analyst estimates for a profit of $0.05, a $0.01 beat. Revenues grew 0.07% year-over-year (YoY) to $2.02 billion, beating analyst estimates for $1.94 billion. SiriusXM self-pay grew by 169,000 subscribers in the quarter. Advertising revenue grew 46% sequentially, after falling (-34%) in Q2. September ad revenue is tracking a YoY increase. SiriusXM raised its full-year 2020 revenue guidance to $7.85 billion versus $7.79 billion analyst consensus estimates. The Company increases self-pay net subscriber additions to approximately 800,000. The Company ended the quarter with $1.75 billion of untapped revolver and expects capex in the range of $330 million.

Conference Call Takeaways

SiriusXM CEO, Jim Meyer, ushered in the new CEO Jennifer Wiz. Meyer provided bullish prospects moving forward, “The business overall has excellent momentum going into year-end. Our new higher guidance now anticipates 2020 revenue, adjusted EBITDA and free cash flow of approximately $7.85 billion, $2.475 billion and $1.6 billion, respectively. We are on track for an extraordinary year.” Meyers had very productive talks with Howard Stern for a “long-term renewal” of his contract, which he hopes to announce soon. Kevin Hard re-signed for his exclusive audio deal. SiriusXM and Pandora have resumed live concerts and events, most of them being virtual. Love major sports broadcasting has also resumed including the NBA, MLB playoffs, every NFL game and college football. Pandora’s Modes continues to show growth with 60% adoption for the quarter.

Auto Sales Rebound Drives Installs

Future CEO and current SiriusXM President Jennifer Wiz noted how resilient the business has been wit just a 1.7% churn during the Q2 auto sales slow down during stay-at-home mandates. She summed it with, “Rebounding auto sales, combined with rising penetration rates mean trial starts are bouncing back too, which sets us up for the fourth quarter and next year. Combined new and used car trial starts were actually up slightly YoY.” The Company expects to push factory penetration to 80% in coming months. Satellite and streaming allows for more personalization with vastly more content which is the core of the next-gen upgrade 360L platform. Wiz laid out the top growth drivers as, “Improving SiriusXM stream offering, drive out-of-car engagements among existing subscribers and acquire streaming-only subscribers who may not have a need for an in-car subscription.”

Deals

On Oct. 14, 2020, SiriusXM announced BMW will feature SiriusXM entertainment service as a standard feature on all models sold in the U.S. starting with model year 2021. On Oct. 30, 2020, SiriusXM announced an expansion of the long-term agreement with Kia Motors America to significantly broaden the installation of SiriusXM throughout KIA models produced in North America. On Nov. 18, 2020, SiriusXM announced a new long-term agreement with NBC Universal News Group NASDAQ: CMCSA. The deal allows for simulcasts of CNBC and MSNBC and TODAY Show Radio to continue to air. The deal makes SiriusXM the exclusive advertising representative and end-to-end tech platform for a broad slate of podcasts for MSNBC, CNBC and NBC News. SiriusXM is evolving into a dominant audio entertainment from anywhere platform with virtually no satellite-based radio competitors. Long-term investors looking for steady growth can monitor opportunistic pullbacks for exposure into this transformational player.

 SIRI Opportunistic Pullback Levels

Using the rifle charts on the monthly and weekly time frames enables a broader view of the playing field. The monthly rifle chart has been choppy as evidenced by the pretzel stochastic mini pup. This is a formation that starts with a stochastic crossover down, indicating bearish momentum starting. However, rather than oscillating down, the stochastic oscillator crosses over back up again causing a short-squeeze to flush the bears. This happened on the monthly chart but evidenced clearly on the weekly rifle chart with the stochastic mini pup flushing up through the $5.57 Fibonacci (fib) level triggering the market structure low (MSL) buy. Currently, the shares are in a breakout that should peak at the weekly upper Bollinger Bands (BBs) to provide opportunistic pullback levels at the $5.89 fib, $5.66 weekly MSL, $5.14 fib and the $4.88 fib in the best case. The upside trajectories range from $7.43 to $9.03 with potential to $11.