Sirius XM Stock Has a Lot to Prove on Wednesday

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It's going to be a big week for Sirius XM Holdings (NASDAQ: SIRI) shareholders. The satellite radio provider reports financial results on Wednesday morning, and the stock's likely going to be a big mover after the second-quarter report rolls out.

Sirius XM isn't as volatile as it was several years ago. Growth has predictably slowed, and the media giant is now consistently profitable. The stock's one-year beta is a mere 0.77, suggesting that it's less reactive than the overall market. This doesn't mean that investors can tap the snooze bar and doze through Wednesday's trading day. The stock still moves when positive or negative news materializes, and that will likely be the case this week.

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Chasing satellites

Analysts see revenue rising 5.4% to $1.42 billion for Sirius XM's second quarter. If that's where Sirius XM lands, it would be its fourth straight quarter of decelerating top-line growth. Slowing growth isn't a death sentence. Sirius XM stock has beaten the market despite posting decelerating growth in all but one quarter over the past two years.

Sirius XM's maturing addressable market and flattening average revenue per user find the satellite radio monopoly posting historically low revenue growth, but it's not taking investors by surprise. Sirius XM's guidance for all of 2018 calls for $5.7 billion in revenue, or 5.1% more than it rang up a year earlier.

Those same Wall Street pros see earnings per share growing even faster, rising to $0.06 from $0.04 during last year's second quarter. We've been seeing Sirius XM's bottom line grow at more impressive rates than its revenue, given the scalable nature of the model that's high on fixed costs and kind on variable overhead.

The big thing to watch come Wednesday morning is what Sirius XM does to its full-year outlook. It has historically boosted at least some, if not all, aspects of its guidance with every passing quarter, but it simply reiterated its initial read last time out.

Sirius XM's stock is trading nearly 8% below the multiyear high it set last month, but it's also trading 14% higher than it was when it put up its first-quarter numbers three months ago. Sirius XM may be slowing, and it failed to boost its guidance in April, but investors have been bidding up the stock anyway. A return to accelerating revenue growth or a guidance boost would justify the last three months of stock gains, if not a return to last month's highs.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.