Bank of America is expressing concern about Sirius XM stock, citing headwinds that BofA believes threaten the company’s near-term profitability and growth.
Investing.com reports that analysts at the bank have resumed coverage of the satellite radio provider with an Underperform rating and a $23 price target.
BofA says Sirius XM has “challenging road ahead” and is now viewed as a “show-me story” for investors, with its subscriber growth expected to remain muted as it struggles to attract younger listeners.
“Additionally,” according to the report, “BofA argues that the widespread adoption of Apple CarPlay and Android Auto has diminished Sirius XM’s in-vehicle advantage, contributing to lower new car conversion rates.”
BofA estimates Sirius XM’s current conversion rate at about 30% vs. approximately 40% in earlier years. The analysts further note that the company's ability to maintain its subscriber base depends heavily on historically low churn rates.
BofA also called out Pandora, the Sirius XM-owned streaming service, as a weak spot. It says Pandora will see more declines in active users as well as listening hours. BofA sees a 3% decline in Pandora’s listening hours, despite a stabilized ad market.
SIRI is rated “strong buy” by SA analysts and “hold” by Wall Street and Seeking Alpha Quant.