Warren Buffett’s Berkshire Hathaway has been buying more shares of Sirius XM. The company recently added another 2.3 million shares, boosting its stake to 35%. This means Berkshire now owns 35.4% of Sirius XM.
Sirius XM is a satellite radio leader that operates its own radio subscription service. It also owns the Pandora platform. The company has faced some challenges recently.
Its revenue has been flat for the past four years and is expected to decline in 2025. The subscriber base is also about 5% smaller than it was at its peak in 2019. However, there are reasons for optimism about Sirius XM.
The company essentially has a legal monopoly on the satellite radio industry, especially for new vehicle installations. As interest rates fall, it could boost new car sales, which is a key area for attracting new subscribers. Sirius XM has also introduced initiatives to bolster its new car business, such as a three-year dealer-paid subscription program.
Sirius XM has significant potential in advertising as well. Programmatic podcast ad revenue has shown strong growth.
Berkshire’s growing stake in Sirius XM
The company launched a free ad-supported membership tier, a strategy that has worked for other streaming providers. Sirius XM aims to add 10 million new subscribers, surpassing its 2019 peak. It also plans to increase free cash flow from $1.15 billion in 2025 to $1.5 billion in 2027.
The stock trades at about 8.5 times forward earnings estimates. Sirius XM is a highly profitable business that could become even more profitable in the future. With growth projections, it trades for less than six times management’s 2027 free cash flow target.
The company is targeting $200 million in annual cost savings in 2025, on top of the roughly $350 million already achieved. Sirius XM has an excellent track record of capital return through dividends and share repurchases. The stock currently yields about 4.1%.
Management has increased the quarterly dividend by more than 50% over the past three years. There is also a $1.166 billion share repurchase authorization in place. It’s unclear who within Berkshire Hathaway is making the investment decisions regarding Sirius XM.
However, it’s evident why the stock may appeal to Buffett or his managers from a risk-reward perspective. There is execution risk involved, but if Sirius XM can meet its targets, the stock could represent significant value at today’s prices.
