April was a brutal month for the majority of the stocks in the market, and steep declines were recorded across the board. However, there were some exceptions in this regard, and one such was Sirius XM Holdings Inc (NASDAQ:SIRI), which managed to deliver gains of 19.6% in April. The stock ended the month on $5.91 a share, up from $4.94 a share. The stock had suffered declines prior to that in light of investor concerns over the company’s ability to retain its existing customers and grow its customer base.
A large chunk of the company’s subscribers is those who listen to the service while being in their cars, and due to the widespread lockdowns, there were fears about its business. People who used to drive to work are no longer doing so at this point. On top of that, many of the new subscribers of the SiriusXM service are generated through free trials given away following a new car purchase.
However, car sales have dropped as well in recent times. The service costs $14 a month, but since many of the consumers are now saving up in an uncertain economic environment, there were genuine fears about cancellations.
SiriusXM released its first-quarter financial results on April 28 and reported the addition of only 69000 self-pay subscribers. For context, the company had added as many as 1.1 million subscribers last year. The company had, in fact, projected that it was going to add as many as 900000 net new self-pay subscribers in 2020.
Following the first-quarter performance, there was no option for the SiriusXM management but to withdraw the projections. The fortunes of the stock will be fairly dependent on the rebound in car sales following the easing of lockdown measures. That being said, if new cat sales continue to be depressed, it might have an impact on SiriusXM and its business. Hence, there may be certain long terms risks at play here.