Why SiriusXM Radio Stock Lost 28% in September

Shares of Sirius XM Holdings (NASDAQ: SIRI) were heading lower last month as investors seemed to balk at its reverse split after it was spun off from Liberty Media.

Some Wall Street analysts also weighed in with mixed commentary on the stock. According to data from S&P Global Market Intelligence, the stock finished September down 28%.

As you can see from the chart, the stock fell sharply in the first half of the month as the broad market pulled back and as investors anticipated the reverse split.

SIRI data by YCharts

SiriusXM goes in reverse

The major news with SiriusXM last month was its reverse split and spinoff from Liberty Media.

On Sept. 9 after markets closed, Liberty Sirius XM Holdings spun off and merged with Sirius XM Holdings, becoming an independent company from Liberty Media.

At the same time, the stock went through a 1-for-10 reverse stock split to get its stock price out of penny-stock range, and the transaction also reduced its shares outstanding by 12%, helping to lift the stock in the immediate aftermath of the transaction.

It also reaffirmed its full-year guidance, calling for revenue of $8.75 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.7 billion. It did cut its free cash flow target from $1.2 billion to $1 billion due to closing payouts to Liberty Sirius XM Holdings.

Wall Street analysts adjusted their price targets following the move, with some more bullish and the revamped company than others. However, investors seemed unimpressed with the move, and the stock fell over four straight sessions, following the initial bump from the merger.

Some Wall Street analysts also called out the company's weak subscriber growth and competition from internet-based platforms like Spotify.

Image source: Getty Images.

What's next for Sirius XM?

Reverse splits are generally reserved for long-suffering stocks, so it's not surprising to see the market balking at the move, especially as the satellite radio provider has been underperforming the market for years.

Though Sirius is solidly profitable, its growth rate won't inspire too many investors. Revenue fell 3% in the second quarter, and Sirius XM self-pay subscribers fell by 100,000 in the quarter.

The upcoming loss of Howard Stern, who's expected to retire or significantly cut back production in 2025, could also put a dent in the stock's returns.

At this point, SiriusXM needs to prove itself before the stock can be considered a buy.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Spotify Technology. The Motley Fool has a disclosure policy.