Shares of Sirius XM Holdings (SIRI 3.44%), a satellite radio company, plunged last month after the company provided updated financial guidance for 2025. Management said revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) would be lower than previous guidance.
Investors were unnerved by the lowered expectations for 2025 and sent shares tumbling 15.4% in December, according to data provided by S&P Global Market Intelligence.
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Lowered expectations
Sirius XM's management said that total revenue in 2025 would be $8.5 billion, down from the company's previous sales guidance of $8.675 billion for the year. Additionally, Sirius XM updated its 2025 adjusted EBITDA guidance to $2.6 billion, down from its previous estimate of $2.7 billion.
Sirius XM CEO Jennifer Witz said in a statement that the company is "taking steps to drive profitability and cash flow as we face marketplace headwinds impacting the company's growth trajectory." The company said one of its key focuses is with automotive business, with 90% of Sirius XM subscribers already having its service embedded in their vehicles.
One minor bright spot in the announcement was the fact that the company now expects $1.15 billion in free cash flow in 2025, slightly higher than its previous estimate of $1 billion.
The company also noted in its press release that it's continuing a "successful implementation of cost-reduction efforts" across many of its business segments, which will result in $200 million in annualized savings by the end of this year.
But investors were rightfully concerned about Sirius XM's leadership lowering financial guidance for revenue and EBITDA. It's a concerning move that indicates this year could be difficult for the satellite radio company.
Tune out this stock for now
Management's lowered 2025 guidance comes after Sirius XM reported disappointing third-quarter results, with revenue declining 5% and gross profit down 7%.
Competition from other audio streaming services and podcasts has left Sirius XM struggling lately, and investors are spurning the stock. The company's share price has dropped 58% over the past 12 months.
Sirius XM's leadership is trying to set expectations for 2025 with its updated guidance, but unfortunately, its expectations are much lower than what investors were hoping for. As Sirius XM attempts to improve its business efficiencies, it's best for investors to tune this stock out for now.
