Warren Buffett, through his company Berkshire Hathaway, has been buying shares of Sirius XM. Sirius XM is a satellite radio company that also owns the Pandora streaming platform. Buffett’s company now owns about 35% of Sirius XM.
Sirius XM’s stock price has fallen by around 50% in the past year. The company’s revenue has been flat for four years. It is expected to drop in 2025.
Sirius XM also has fewer subscribers now than it did at its peak in 2019. However, there are reasons to be optimistic about Sirius XM’s future. The company basically has a monopoly on satellite radio in new cars.
As interest rates go down, more people are likely to buy new cars. This could help Sirius XM attract new subscribers. Sirius XM has also started a program where new car buyers get a free three-year subscription.
This program is becoming more popular. The company is making more money from podcast advertising too.
Berkshire Hathaway’s Sirius XM investment
Sirius XM has launched a free version of its service that includes ads. This strategy has worked well for other streaming companies. Sirius XM believes it can add 10 million new subscribers.
This would be more than its previous peak in 2019. The company also thinks it can increase its free cash flow to $1.5 billion by 2027. Right now, Sirius XM’s stock is trading at a low price compared to its earnings.
If the company meets its goals, the stock could be a great deal at its current price. Sirius XM has a history of giving money back to shareholders through dividends and buying back its own stock. The company’s dividend payments have gone up by more than 50% in the past three years.
It’s not clear if Warren Buffett himself is behind the decision to invest heavily in Sirius XM. It could be one of his investment managers making these moves. But from a risk and reward standpoint, it’s understandable why the stock appeals to Berkshire Hathaway.
There are risks involved, but if Sirius XM can achieve its targets, the stock might turn out to be an excellent investment at today’s low prices. Buffett and his team seem to believe in the long-term potential of the company, even as it faces challenges in the near term.
