What Happened?
Shares of satellite radio and media company Sirius XM (NASDAQ: SIRI) fell 5.9% in the afternoon session after investors appeared to take profits as the company's stock rallied the previous day on a mixed third-quarter earnings report.
The company announced a loss of 40,000 self-pay subscribers and a 1% dip in total revenue to $2.16 billion. However, the report also contained strong positive points that fueled the prior session's gains. Free cash flow surged by 176% to $257 million compared to the same period in the previous year. Furthermore, SiriusXM turned a prior-year loss into a net income of $297 million. Based on this performance, the company raised its full-year 2025 financial guidance for revenue, adjusted EBITDA, and free cash flow. The stock's fall suggested investors decided to cash in on their gains after the initial positive reaction.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Sirius XM? Access our full analysis report here.
What Is The Market Telling Us
Sirius XM’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 10.1% on the news that the company reported third-quarter results that surpassed analyst expectations for both revenue and profit. The satellite radio company reported a GAAP profit of $0.84 per share, a significant turnaround from a loss in the same period last year and 7.9% above consensus estimates. Revenue for the quarter was flat year-on-year at $2.16 billion but still beat forecasts. Despite a year-on-year decline of 574,000 total subscribers, investors appeared to focus on the improved profitability. A key highlight was the company's free cash flow of $257 million, with the free cash flow margin expanding to 11.9% from just 1.1% in the prior year's quarter.
Sirius XM is down 2% since the beginning of the year, and at $21.66 per share, it is trading 24.7% below its 52-week high of $28.74 from December 2024. Investors who bought $1,000 worth of Sirius XM’s shares 5 years ago would now be looking at an investment worth $374.65.
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