Warren Buffett just retired as CEO of Berkshire Hathaway (BRK.A 0.33%) (BRK.B 0.38%), stepping away from his role as perhaps the greatest investor of all time.
Yet, one of Berkshire's longer-term stock holdings, Sirius XM (SIRI 0.56%), has been an underperformer. The stock was most likely purchased by one of Buffett's two investing lieutenants, likely Ted Wechsler.
Sirius XM is now Berkshire's 13th-largest stock holding. Although the stock has declined significantly since Berkshire initially purchased shares through the Liberty tracking stocks in 2016, Berkshire continues to hold shares and actually just added to its stake, with a 4.2% increase to the position in the third quarter.
Berkshire's continued faith in Sirius, combined with its bargain valuation, certainly makes Sirius an interesting stock. Here's why 2026 could bring better returns for Sirius XM shareholders, even with modest improvements, which appear to be underway.
NASDAQ: SIRI
Key Data Points
Two big reasons for the stock's decline
The decline in Sirius's stock has been closely correlated with a decrease in self-pay subscribers and a corresponding decline in overall revenue over the past couple of years. When combined with a substantial $10 billion in net debt on top of a $6.8 billion market cap, it's no wonder Sirius has seen its shares sell off. Today, the stock trades at just over $20 per share, down from a high of $70 during the pandemic's peak.
There have been two big factors accounting for Sirius's subscriber and revenue declines. The first is competition from streaming services. Although Sirius continues to invest in premium, proprietary content, many cash-strapped consumers now have a plethora of options across internet streaming services easily played in the car. Second, actual car sales have been sluggish after the pandemic boom, and new vehicle sales are a crucial customer acquisition tool for Sirius, which often comes as a pre-installed perk from auto dealers.
Although Sirius's monthly churn has been stable over the past two years, at around 1.5% to 1.7% each quarter since the pandemic, the problem has been new customer acquisition. Unsurprisingly, this occurred during a slow two years of below-trend car sales and, consequently, limited new customer acquisition opportunities for Sirius.
Yet, while Sirius is seeing declines, self-pay Sirius subscribers and revenue fell only 1% last quarter, which is relatively stable amid an auto sales downturn and could signal a slowing in the decline. If auto sales pick back up, so could Sirius' growth.
Green shoot: Advertising
Despite declining subscribers, Sirius' advertising revenue increased by 1% last quarter. Given advances in programmatic advertising and the preponderance of customers opting for lower-cost but ad-supported services, this isn't surprising. After all, even premium TV streaming services like Netflix have relented and introduced lower-priced ad-supported tiers for their services to expand their reach.
Sirius is slowly experimenting with lower-cost plans. In 2024, Sirius began offering a free ad-supported plan called Sirius Free Access in select auto models, which is a limited 41-channel offering completely supported by ads. After offering the service to Nissan and Polestar vehicles that have 360L hybrid radios installed, Sirius expanded access to the new free service earlier in 2025. Then, this past summer, Sirius began offering SiriusXM Play, a lower-cost plan under $7 per month that includes some advertising support across 130 channels.
Sirius is now looking to boost its advertising revenue per user through a new partnership with Amazon (AMZN 1.52%) and its programmatic demand-side platform (DSP). More programmatic advertising could increase the average revenue per ad, since the DSP should open up Sirius's inventory to a larger pool of advertisers.
Image source: Getty Images.
Management is cutting costs
Cognizant of growth headwinds, management has also been aggressively cutting costs. Sirius CFO Thomas Barry noted that the company achieved $200 million in cost savings target already in 2025, although it's also reinvesting those proceeds in new growth initiatives. But Barry also noted that Sirius "wasn't stopping" at that target, and is continuing to restructure the cost basis of the business.
Capital expenditures are also expected to decline over the next few years, as the company's satellite launch spending is projected to decrease by $85 million, from $200 million to $115 million, in 2026 and should continue falling to nearly zero by 2028.
So, even if Sirius maintains just flat revenue, profits and cash flow are expected to increase over the next three years. While there is a question as to what lies beyond that, in light of the company's cost control and lower capex needs, Sirius's free-cash-flow target of $1.50 billion by 2027, up from this year's guide of $1.23 billion, seems achievable.
Sirius XM won't look too different in 2026, but its stock price might
One year from now, it's quite likely that Sirius XM's slow-moving subscription business won't look that different, but its stock price might. Subscriber losses and revenue declines have kept buyers at bay and fueled the fear that Sirius may be a value trap.
However, if auto sales can get back to their pre-pandemic level and Sirius can succeed in advertising-based tiers, the company's top line could stabilize and return to growth.
Sirius trades at just 5.6 times this year's cash-flow estimates and, again, does carry significant debt of $10 billion. Yet, even on an enterprise value-to-free-cash-flow basis, Sirius is trading at only 13.8 times, which is still not expensive.
Sirius's high leverage means that small changes in the forecast can significantly impact what investors are willing to pay for the stock. So, if Sirius can shift from top-line declines back to growth, even modest growth, its valuation multiple could change significantly. That's the big question as management navigates the dynamic streaming and audio content market.
