Risk and Return in the Audio Industry: A Comparative Analysis of SiriusXM and iHeartMedia

Kewen Fan

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.ACCOUNTING

Faculty Research Mentor: Huaibing Yu

Abstract:

Within the audio industry, SiriusXM Holdings Inc. (SIRI) is a leading satellite radio and audio entertainment company in the United States, primarily providing services through subscriptions. Meanwhile, iHeartMedia, Inc. (IHRT) is one of the largest traditional radio broadcasters in the United States, having restructured from bankruptcy in 2019 and generating revenue mainly through advertising. This research aims to evaluate and compare the risk and return of investing in the stocks of these two companies, especially the differences arising from applying various business models. Using historical stock price data from Yahoo Finance, this research calculates and compares the expected return, standard deviation, and beta coefficient of both companies. Further, to assess whether their stocks are fairly priced, this research applies the security market line (SML) to visualize their situations. In this research, iHeartMedia is anticipated to have a higher risk due to its historical financial crises and reliance on advertising revenue, while SiriusXM may have more stable returns supported by its subscription-based revenue. This analysis of risk-return profiles may help investors better understand the difference in investment risk among companies with contrasting revenue models in the audio entertainment industry.