Morgan Stanley analyst Benjamin Swinburne downgraded Sirius XM (NASDAQ:) to Underweight from Equal Weight with a $7.00 per share price target.
The rating cut comes on the heels of rising risks related to self pay net additions that reflect macro headwinds in the auto market. Moreover, lower estimates are now sitting below both the guidance and consensus.
“While the cable/satellite industry can be appropriately characterized as offering investors relatively defensive business models, SiriusXM is the most cyclical in the group as a function of its exposure to US auto sales. In addition, advertising has taken on a larger role as a growth
driver since its 2019 acquisition of Pandora (OTC:),” Swinburne wrote in a client note.
Morgan Stanley’s model is now closer to the bear case than the bull case amid slowing growth.
“A highly attractive business model, SiriusXM appears to nonetheless be maturing and organic growth is slowing. In the five years prior to the pandemic, adjusted EBITDA grew at a 10-11% CAGR while we expect that CAGR over the next five years to be 3-4%. Though its multiple has already compressed from the pre-pandemic days, its relative multiple vs. the industry group (CMCSA/CHTR) has not,” the analyst added.
SIRI stock price is down 1.6% today.
By Senad Karaahmetovic