Is Sirius XM Stock a Buy, Sell, or Hold in 2025?

With its stock price down more than 50% on the year, Sirius XM's (NASDAQ: SIRI) management has turned its focus to next year and what efforts it will need to make to turn its fortunes around. It did take some steps this year though in that regard, including becoming fully independent after a complicated spin-off/reverse stock-split transaction with Liberty Media.

The company is best known for its namesake satellite radio service, but it also owns the Pandora streaming music app and a podcast network. Sirius is solidly profitable, but the company has struggled to grow its revenue and audience in recent years.

Let's look at the buy and sell cases for the stock going into 2025.

The buy case

At this point, Sirius XM is largely a financial engineering and deleveraging story. The split with Liberty Media in September reduced its share count by 12%, but added an additional $1.7 billion in debt. That brought its net debt to $10.6 billion at the end of September.

The company recently issued guidance for 2025 with projections for free cash flow of $1.15 billion. It expects to use $700 million of that to reduce debt and bring its leverage down to 3.6 times by year-end 2025.

Free cash flow is one of the company's biggest focuses moving forward, and it expects to generate free cash flow of $1.5 billion by 2027. Much of this will come from declining satellite capital expenditures (capex), which are expected to go from $300 million in 2024 to negligible by 2028.

Data source: Sirius XM presentation.

It also expects to lower its non-satellite capex from a range of $450 million to $500 million in 2024 to below $400 million in 2026. The company has also been lowering its costs and expects to reduce costs by another $200 million in 2025. Free cash flow, meanwhile, will be used to pay down debt, pay a dividend, and buy back shares.

From an operational standpoint, the company will look to lean into its core automotive segment. It recently added Toyota Motor to its roster of automakers for its wholesale three-year subscription program, and it now counts nine total automakers in this program.

Image source: Getty Images.

The company has also broadened its pricing strategy to attract new users at different pricing points. This includes a $9.99 a month tier for music-only channels, as well as add-on options for sports, news, and talk radio. It also will continue to offer its premium subscriptions that include its full lineup of channels. It hopes the move will bring in more customers while also reducing the amount of discounts it offers.

Sirius XM will also invest in adtech, looking to take its knowledge in monetizing Pandora and its podcasts and bring it to its core satellite radio service. It also wants to eventually introduce integrated, addressable in-car ad experiences.

From a valuation standpoint, the stock trades at a forward price-to-earnings (P/E) ratio of about 7.9 based on 2025 analyst estimates and an enterprise value (EV)-to-EBITDA ratio of about 7.5 as of this writing.

SIRI PE Ratio (Forward 1y) data by YCharts

The sell case

While Sirius XM has been a pretty steady business that generates strong free cash flow, it is not a growth business.

The company recently issued guidance for 2025, where it projected revenue of approximately $8.5 billion and adjusted EBITDA of about $2.6 billion. That is lower than its 2024 forecast calling for revenue of around $8.675 billion and adjusted EBITDA of approximately $2.7 billion. That's a 2% decline in revenue and a 4% decline in EBITDA. Free cash flow, though, is expected to increase by 15% from $1 billion in 2025 to $1.15 billion.

The company is struggling to add subscribers, with paid self-pay subscribers (those not getting a promotional subscription) down 1% year over year to 31.5 million at the end of Q3. However, it did add 14,000 self-pay subscribers sequentially.

Total U.S. Sirius XM subscribers, meanwhile, which includes paid promotional subscribers, was down 2% year over year to 33.2 million subs. Pandora self-pay subscribers have also been falling, down 5% year over year to just under 5.9 million.

Average revenue per user (ARPU) also has trended slightly lower, down 2% over the past nine months and 3% in Q3 at Sirius XM. ARPU was $15.16 for Q3 and $15.25 over the past nine months.

Currently, the company is working to increase its customer base through its new pricing plan, but it also needs to be careful to now manage the possibility of existing customers deciding to downgrade to lower price point plans as well.

The verdict

While not an exciting growth story, I think Sirius XM's valuation is attractive following the sell-off it has seen this year. Meanwhile, the company generates a lot of free cash flow that will help lower debt and its share count. That should create value over time. I also think the company set a low bar going into 2025, which isn't a bad move when looking for a stock to rebound. As such, I think it's a solid option for investors to consider buying as a rebound candidate.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.