The growing use of radio for advertisements and as a cost-effective influential medium for reaching many audiences is expected to drive growth in the industry. However, the rising digitalization and acceptance of social media for advertising are restraining the market growth. Also, regulations on the radio spectrum are hampering growth in the radio market.
Thus, entertainment stocks Sirius XM Holdings Inc. (SIRI) and Saga Communications, Inc. (SGA) might be best kept on hold, considering their mixed fundamentals.
Radio is one of the oldest media, which is very helpful for advisements and is cheaper than television. Radio is a very strong and cost-effective influential medium for reaching many audiences. Many companies are still using radio advertising as their marketing strategy. The global radio station market is expected to grow at a CAGR of 4.3% this year.
However, the rise of streaming services, podcasts, and online platforms has posed a threat to traditional radio broadcasters, resulting in a diminishing audience base. Also, the rising adoption of streaming services over traditional cable or satellite TV has led to a decline in conventional broadcasting viewership.
Stocks to Hold:
Sirius XM Holdings Inc. (SIRI)
SIRI is an audio entertainment company that operates audio business, including subscription entertainment services in the United States. It operates through Sirius XM and Pandora; and Off-platform segment.
SIRI pays $0.10 annually as dividends. This translates to a yield of 1.37% at the current price, compared to the four-year average dividend yield of 2.21%. Its dividend payments have grown at a CAGR of 22% over the past three years respectively.
SIRI’s trailing-12-month EBITDA margin of 28.69% is 58.7% higher than the 18.08% industry average. However, its trailing-12-month cash per share of 0.01x is 99.1% lower than the 1.51x industry average.
SIRI’s total revenue came in at $2.14 billion in the fiscal first quarter that ended March 31, 2023. However, its net income declined 24.6% year-over-year to $233 million. Its net income per common share decreased 25% year-over-year to $0.06. Also, its adjusted EBITDA decreased 9.4% year-over-year to $635 million.
SIRI’s EPS is expected to increase 7.5% year-over-year to $0.08 for the fiscal second quarter that ended June 2023. In contrast, its EPS is expected to decline marginally year-over-year to $2.24 billion in the same quarter. Also, it has failed to surpass EPS estimates in three of the trailing four quarters, which is disappointing.
The stock has gained 84.4% over the past three months to close the last trading session at $7.08.
SIRI’s POWR Ratings reflect its mixed outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SIRI has a C grade for Value and Stability. It is ranked #5 out of 6 stocks in the Entertainment - Radio industry.
Click here to see the additional POWR Ratings for SIRI (Sentiment, Momentum, Quality, and Growth).
Saga Communications, Inc. (SGA)
SGA is a broadcast company that acquires, develops, and operates broadcast properties in the United States.
SGA pays $1.00 annually as dividends. This translates to a yield of 4.63% at the current price, compared to the four-year average dividend yield of 6.99%.
While SGA’s trailing-12-month net income margin of 7.74% is 163.7% higher than the 2.94% industry average, its trailing-12-month gross profit margin of 23.05% is 53.5% lower than the 49.59% industry average.
SGA’s net operating revenue increased 1.3% year-over-year to $25.30 million in the fiscal first quarter that ended March 31, 2023. However, its net income declined 23.6% year-over-year to $920 thousand and its EPS decreased 25% year-over-year to $0.15.
The stock plunged 5.6% over the past three months but gained 2.2% over the past month to close the last trading session at $21.61.
The stock has an overall C rating, equating to a Neutral in our proprietary rating system.
SGA also has a C grade for Value, Stability, and Quality. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated SGA for Growth, Momentum, and Sentiment. Get all SGA ratings here.
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SIRI shares were trading at $6.35 per share on Monday morning, down $0.73 (-10.31%). Year-to-date, SIRI has gained 9.97%, versus a 19.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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