It would've been shocking to see the names Warren Buffett and Sirius XM Holdings (SIRI 0.21%) mentioned in the same sentence in the early years of satellite radio. Sirius XM was a speculative penny stock for years, a battleground stock that was a meme stock before meme stocks were a thing.
A generation ago, Sirius XM was a revolutionary trailblazer, but it was also on the brink of bankruptcy even after completing the merger of the only two domestic satellite radio providers in the country. It struck a highly dilutive deal to stay afloat, and now it's finally boring enough to be one of the roughly four dozen publicly traded stocks owned by Berkshire Hathaway (BRK.A +0.45%) (BRK.B +1.20%).
The story doesn't end there. Sirius XM's transformation from a risky growth stock to a high-yielding value stock should get Berkshire Hathaway investors excited. You might also want to buy into the stock directly, as this ridiculously cheap stock could help make you richer.
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Around the dial
Sirius XM isn't the growth stock that it used to be. It hasn't posted double-digit organic growth since 2014. Sirius XM did report a 35% top-line jump in 2019, but that was inflated by the Pandora acquisition that closed earlier that year. In short, it's been single-digit positive and experienced negative organic revenue moves every year for more than a decade. The stock has plummeted 41% since the end of 2014.
This doesn't make Sirius XM a bad bet. It's been making a lot of sunshine in the shade. It is stretching its streak of 10-figure free cash flow to 11 years in 2025, and that money has gone toward paying buying back shares and a quarterly dividend that has increased every year since 2017. Both levers are moving the needle.
Its aggressive stock buybacks have lowered its diluted share count by 40% since the end of 2014. So the stock is down 41%, but its market cap has fallen from $20.5 billion to $7 billion since 2014, a decline of 66% in that time. This also doesn't account for the $6.32 a share that investors have received split-adjusted dividends in that time.
NASDAQ: SIRI
Key Data Points
Value in volume
Take in how the market cap has been obliterated over the past decade. The obvious conclusion is that it's been a bad 10 years to own Sirius XM. Let's not talk about the rearview mirror, where objects may be closer than they appear. Let's follow the windshield into the future.
The catalysts are everywhere. The average age of cars on the road has never been higher. There is a lot of pent-up demand for auto purchases, and that's the primary funnel for new Sirius XM subscriptions. The amount of time we spend in cars is also a major factor in the value proposition of seamless coast-to-coast access to satellite radio. The pandemic did a number on office commutes and leisure travel, and that's been gradually improving since remote work peaked in 2021 and staycations in 2020. Financing a car purchase is still high, but it has fallen since since topping out last year.
The economy remains the one foggy obstacle on the road ahead, but it doesn't take much of a lift to boost the affordability of a platform with pricing between $10 and $25 a month. In the meantime, Sirius XM has made strides to improve the attractiveness of its service to younger drivers who have been reluctant to sign up in the past. It has scored deals with popular and rising podcasters and morning show hosts. It's well-positioned in case Howard Stern and Sirius XM part ways after 20 years together come January.
Against this promising backdrop, the stock has never been cheaper. Sirius XM stock is trading for just 6.7 times forward earnings. Investors are receiving quarterly dividends yielding 5.2% at a time when fixed income rates are sliding. After three years of slight revenue dips, analysts see a return to revenue growth next year on a 13% jump in earnings per share.
Buffett can see the value in the opportunity. Berkshire Hathaway has trimmed many of its key portfolio positions as it raises cash, but it has added to its Sirius XM stake a couple of times since the summer of last year. Berkshire Hathaway now owns a whopping 37% of the country's satellite radio monopoly. I've never seen Buffett play a board game, but something tells me he would be hard to beat in a game of Monopoly.
