Expanding In-Car Digital Subscriptions Will Fuel Future Audio Success

Key Takeaways

• Expanded subscription offerings, premium content, and advanced technology are increasing SiriusXM's addressable market, enhancing subscriber growth, and improving operational efficiency.
  
• Rising digital audio advertising, exclusive podcasting, and multi-platform engagement are boosting monetization opportunities, supporting revenue stability, and reducing subscriber churn.
  
• Secular shifts towards on-demand audio, rising content costs, over-reliance on auto subscriptions, and tech giant competition threaten subscriber growth, profit margins, and long-term revenue stability.

Catalysts

Operates as an audio entertainment company in North America.

• SiriusXM is expanding its suite of in-car and digital subscription offerings, notably with the launch of the new ad-supported SiriusXM Play plan, aiming to tap into a pool of up to 100 million vehicles and reach more price-sensitive listeners-this expanded addressable market and improved packaging is likely to boost revenue and support subscriber growth in 2026 and beyond.
  
• Exclusive content investments, such as deals with major personalities and diverse podcast creators (e.g., Stephen A. Smith, Trevor Noah, Mel Robbins), as well as leveraging their leadership position in live sports and podcasting, are enhancing SiriusXM's value proposition, supporting higher ARPU and reducing subscriber churn, which benefits revenue stability and long-term earnings.
  
• Ongoing integration of advanced technology-including AI-driven customer service, content search, and targeted marketing-alongside automation initiatives and workforce realignment, is providing operational efficiencies and lowering costs, setting up for improved net margins over time.
  
• Growth in cross-platform engagement (in-car, app, streaming, and social/video) is driving higher user interaction and satisfaction, sustaining high retention rates among core high-value demographics while creating more monetization opportunities, thereby supporting recurring revenue and protecting free cash flow.
  
• Rapid growth in podcast advertising (up nearly 50% YoY) and improvements in audio ad tech, such as new measurement and buying tools, are positioning SiriusXM to further capitalize on the secular trend of rising digital audio advertising, which is expected to provide additional upside to overall advertising revenue and future earnings.

Sirius XM Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Sirius XM Holdings's revenue will decrease by 0.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -20.5% today to 12.7% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $3.19) by about August 2028, up from $-1.8 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $952.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.3x on those 2028 earnings, up from -4.4x today. This future PE is lower than the current PE for the US Media industry at 20.5x.
• Analysts expect the number of shares outstanding to decline by 0.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.95%, as per the Simply Wall St company report.

Sirius XM Holdings Future Earnings Per Share Growth

Risks

• The ongoing decline in both subscription and advertising revenue streams, with revenue down 2% year-over-year and persistent subscriber base shrinkage, indicates structural challenges in growing top-line revenue, particularly as secular trends favor on-demand streaming competitors over SiriusXM's subscription model.
  
• Heavy dependence on the automotive sector for new subscriber growth exposes SiriusXM to long-term risks from disruptions in car sales cycles, connected car platforms prioritizing rival apps, and changing consumer habits-threatening future subscriber additions and long-term revenue stability.
  
• Rising content acquisition and subscriber acquisition costs, combined with high fixed satellite and infrastructure expenses, could compress net margins and EBITDA, especially as incremental subscriber growth becomes increasingly more expensive and difficult to sustain amid mounting competition and market saturation.
  
• SiriusXM's efforts to attract a younger demographic are still in early stages and largely confined to its ad-supported podcast segment; generational shifts in audio consumption habits-youth preferring free, on-demand, or crowd-sourced content-pose long-term challenges to paid subscription growth, pressuring both ARPU and overall earnings potential.
  
• Intensifying competition from tech giants (Spotify, Apple, Amazon, Google) and ongoing industry digitization risks further fragmenting the audio market, increasing content and advertising acquisition costs, eroding SiriusXM's differentiation, and challenging its ability to maintain or grow share-placing future revenues and earnings at risk.

Valuation

• The analysts have a consensus price target of $23.643 for Sirius XM Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $18.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.5 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 9.3x, assuming you use a discount rate of 9.0%.
• Given the current share price of $22.93, the analyst price target of $23.64 is 3.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.