A lot can happen in a year. Sirius XM Holdings (SIRI 0.49%) investors know that in a bad way. Shares of the satellite radio provider shed more than half of their value last year. The stock has rebounded with a 16% gain so far in 2025, but it's still down 44% over the past year.
Your initial instinct may be to think that audio entertainment itself is a dud for investors in this visual age, but that misses the mark. Spotify (NYSE: SPOT) has been one of the market's hottest stocks. The digital streaming audio platform's stock more than doubled in 2024, and it's already up more than 40% in this young year.
It's not that the digital revolution has left Sirius XM behind. It may be consumed largely as a live in-car radio platform, but the service is also available live or on demand as a streaming service. Sirius XM also owns streaming audio pioneer Pandora Music. Sirius XM faces headwinds that don't apply to Spotify, but can this out-of-favor and fundamentally cheap stock continue to pad this year's early gains to be a market beater in the year ahead? Let's take a closer look.
Stern warning
Let's start with the one thing that may be very different for Sirius XM a year from now. Howard Stern -- the popular morning talk show host who validated satellite radio when he arrived on the platform 19 years ago -- might be done with live broadcasts on Sirius XM come January of next year. He's in the final year of his fourth five-year contract, and it wouldn't surprise anyone if one or both parties decide to move on.
The broadcasting legend will be 72 a year from now. He has more than earned his right to retire. He has likely stayed on this long more to keep his staff working than for his own benefit. Sirius XM has also spent the past year building up its on-air arsenal with popular podcasters and radio hosts, either preparing for Stern's departure or in an effort to appeal to younger listeners that have proven to be elusive for the platform lately.
If Stern and Sirius XM part ways in December, it won't necessarily lead to an immediate outflow of subscribers. The satellite radio monopoly will still have access to the Stern catalog of content through the end of 2027. Reruns highlighting the best content on the show over two decades isn't the same as fresh live content, but it could keep fans of the show close.
It's also not as if a single celebrity host was enough to keep Sirius XM growing. Revenue and subscriber counts have declined slightly for two consecutive years, and Sirius XM's own guidance calls for a 2% top-line dip along with a 5% decline in what could be the final year of Stern live on satellite radio airwaves. This doesn't mean that things will end badly for Sirius XM investors at this point.
Image source: Getty Images.
Rockin' in the free world
Revenue declines accelerated for Sirius XM from 0.6% in 2023 to 2.8% last year. It's not the medium. Spotify's top-line jump accelerated to 18% in 2024. Sirius XM investors are bracing for another modest dip in 2025, but there's still time to turn that around.
There are plenty of potentially bullish catalysts in the works. Workers being called back to in-office work will mean more time to kill on morning and afternoon commutes. As a platform consumed largely in vehicles, folks spending more time on the road can ramp up the value proposition of a satellite radio subscription. With gas prices holding steady and a lot lower than their 2022 peak, there are other incentives to get drivers on the road again, and this creates wear and tear on cars, and nothing is better for Sirius XM's funnel of new trial subscribers than a pick-up in auto sales. Throw in the addition last year of popular Call Me Daddy and SmartLess podcast hosts and a turnaround in car sales could lead to young listeners warming up to Sirius XM.
Let's also not forget about legendary investor Warren Buffett, whose Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) is an investor in Sirius XM. And when the stock continued to drop last year, Buffett's holding company added to its growing position in October and in December. Berkshire Hathaway now owns more than a third of Sirius XM stock. If it slides again with the fundamentals intact, it wouldn't be a surprise to see Buffett buying again.
Even if Sirius XM isn't able to turn its business around by the end of 2025, it doesn't mean the stock will meander like its financials. Sirius XM is trading for just 8.6 times earnings. It has a generous 4%-yielding dividend that has increased every year since a quarterly payout policy initiated eight years ago. And -- for now at least -- analysts see a return to positive revenue and earnings growth in 2026.
Wall Street pros see a mere 0.4% increase on the top line and a 1.6% rise on the bottom line. Sirius XM doesn't get there unless its subscriber count has stabilized or if its monetization skills have improved. Just one of those things could be enough to woo the growth bulls back. Buffett's stake is attracting the value bulls. Sirius XM is better positioned than you might think to finally beat the market in the next 12 months.
