Sirius XM Stock Post-Earnings: Buy the Dip or Brace for Impact?

Satellite radio giant Sirius XM just dropped its earnings bomb—now what? Investors are scrambling to decode whether this is a screaming buy or a value trap in disguise.

Bull case: Subscriber metrics beat expectations (again). Bears see debt-laden balance sheets and streaming wars heating up. The stock's trading like a meme coin—volatile, divisive, and allergic to middle ground.

Wall Street's take? Analysts can't decide if it's a 'recession-proof cash cow' or 'legacy media's last gasp.' Meanwhile, the CFO keeps talking about 'leveraging synergies'—corporate speak for 'praying the music doesn't stop.'

One thing's clear: In a market obsessed with AI and crypto, Sirius XM feels like betting on fax machines. But hey—sometimes old tech gets its day. Just ask anyone still holding Blockbuster stock.

Image source: Getty Images.

Growth is hard to come by

During the second quarter (ended June 30), Sirius XM's revenue dipped 2% from Q2 2024 to $2.1 billion. That was driven by a declining user base. As of June 30, there were 32.8 million paid Sirius XM subscribers, down by 460,000 over the past year.

For what it's worth, Sirius XM doesn't face direct competition from any other satellite radio providers, as this is the only one that's legally allowed in the U.S. And to its benefit, the company generated 76.2% of its revenue from subscriptions in Q2, compared to a 20.2% share from advertising. This is advantageous because the sales coming from subscriptions are recurring in nature and likely more durable, whereas ad revenue can exhibit cyclicality that's influenced by macro forces.

There is no denying that Sirius XM will have a hard time registering growth going forward. Consensus analyst estimates call for revenue to decline at a 0.7% annualized rate between 2024 and 2027.

The key factor that has had a huge negative impact on the company is the rise of internet-enabled streaming services.,, and's YouTube all give consumers compelling options for audio entertainment.

Free cash flow remains robust

Even though the company will undoubtedly struggle to grow its subscriber base and revenue going forward, Sirius XM doesn't have any issue when it comes to profitability. Although diluted earnings per share did drop 23% in Q2, the business had a net profit margin of 9.6% for the quarter.

Management is focused on cost-cutting efforts. The goal is to get to $200 million in annual run-rate expense reductions. That could help with the bottom line.

Sirius XM generated $402 million in free cash flow (FCF) during the second quarter, up 27%. Capital expenditures will continue decreasing in the years ahead. So, management's outlook has FCF totaling $1.5 billion in 2027. That WOULD represent a 30.4% gain from the forecast $1.15 billion for this year.

The leadership team has allocated this excess cash to the benefit of investors. Sirius XM repurchased $45 million worth of shares in Q2. Compared to the same period last year, the diluted outstanding share count has shrunk by a notable 5.6%.

Appealing to dividend investors

Another key part of Sirius XM's capital allocation plan is to pay a dividend, which totaled $92 million in Q2. Because the stock's valuation is dirt cheap, at a price-to-earnings (P/E) ratio of 8.1, the dividend yield sits at a hefty 5.11%.

Investors can find comfort knowing that legendary investor Warren Buffett is a big shareholder in this company. He knows how to pick winning investments, so maybe the Oracle of Omaha sees something in Sirius XM.

However, I think individual investors are better off avoiding this stock. Yes, the business is consistently profitable. The low P/E ratio is compelling, and the dividend yield can provide a nice income stream.

But with there being intense competition from powerful streaming services, Sirius XM is facing a headwind when it comes to driving any growth. It wouldn't be surprising to see the company shrink over time.