Warren Buffett, the billionaire investor and CEO of Berkshire Hathaway, has been buying shares of Sirius XM Holdings Inc. despite the stock’s poor performance this year. Sirius XM’s stock has fallen nearly 58% in 2024, and some Wall Street analysts have recently downgraded the company.
However, Buffett seems to see potential in the digital audio company. Sirius XM operates satellite radio and the music streaming service Pandora. The company recently split off from Liberty Media and conducted a reverse 1-for-10 stock split to make its shares more attractive to investors.
Sirius XM has also been building out its podcast platform by purchasing exclusive distribution and ad sales rights from popular brands. The company pays a 4.6% dividend yield and is considering share repurchases, which could allow investors to collect passive income while Sirius XM executes its turnaround plan. However, the company recently provided a strategic update and updated guidance for 2025 that fell short of analyst estimates.
This led to several downgrades from analysts who cited concerns about subscriber trends and disappointing guidance.
Buffett’s growing confidence in Sirius
Despite these challenges, Berkshire Hathaway has significantly increased its stake in Sirius XM this year.
Buffett is known for being a long-term investor in turnaround stocks with strong dividends. While subscriber trends need improvement, Sirius XM has a strategic plan, is generating significant free cash flow, lowering debt, and paying a healthy dividend. Sirius XM’s board of directors has also authorized a share repurchase program, which could indicate confidence in the company’s future.
With the stock trading at around 8 times earnings, long-term investors may find it worthwhile to give management more time to navigate the turnaround. Buffett’s recent acquisition of nearly 5 million shares of Sirius XM at $21.60 per share underscores his continued interest in the media sector. The transaction increased Berkshire Hathaway’s total holdings in Sirius XM to over 117 million shares, representing 34.63% of the firm’s holdings in the stock.
While Sirius XM faces significant market challenges and competition from major streaming services, Buffett’s investment suggests confidence in the company’s long-term potential. The stock’s price-to-GF value ratio of 0.38 reflects its undervaluation relative to its intrinsic value. Sirius XM’s stock has experienced a year-to-date decline of 62.51% and a price change of -4.72% since Buffett’s transaction.
This price drop and the company’s market challenges indicate potential risks, but the strategic investment by Berkshire Hathaway hints at underlying confidence in Sirius XM’s prospects.
