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Globe and Mail
a day ago
- Business
- Globe and Mail
Should You Forget Sirius XM? This Stock Has Made Far More Millionaires.
Anytime Warren Buffett makes a move, the entire investing world watches closely. So it makes sense that investors might be interested in buying shares of Sirius XM (NASDAQ: SIRI). Buffett's conglomerate Berkshire Hathaway owns 35.4% of the satellite radio operator. However, Sirius XM stock has been a dud, generating a total return of negative 55% in the past five years (as of June 26). At the same time, the S&P 500 index put together a total return of 113% in that period. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Should investors forget about Sirius XM altogether? A different stock has made far more millionaires. The thesis for SiriusXM stock When Buffett and his team decide to buy a large stake in a business, investors should take the time to understand the reasoning behind such a decision. I believe there are some key factors that might make Sirius XM a stock worth considering. For starters, the business collects a recurring revenue stream from subscriptions. In the first quarter (ended March 31), 77% of its overall sales were derived from subscriptions. Management at least has some visibility when it comes to forecasting financial performance into the future. Sirius XM is the only satellite radio provider in the U.S. Therefore, it has a legal monopoly. This creates a durable competitive strength supporting the business, which is a feature I'm sure encourages Buffett. There aren't direct rivals to Sirius XM, although there is competition from streaming platforms. And for what it's worth, the leadership team is driving expense reductions, which could lead to higher free cash flow. The stock is cheap at a forward price-to-earnings (P/E) ratio of 7.9, with a healthy dividend yield of 4.81%. However, the business is not growing. In Q1, Sirius XM's domestic subscribers were down 2% year over year, revenue was down 4%, and net income was down 15%. The market clearly isn't happy with this trend. Maybe it's time to buy this millionaire maker Sirius XM continues to be a huge disappointment for its shareholders, so it might be time to switch gears and focus on a proven winner. Just look at Amazon (NASDAQ: AMZN), whose shares have catapulted 12,000% higher in the past two decades. A $8,300 investment made in the tech giant in June 2005 would be worth $1 million today. There are three main reasons to believe that Amazon can continue being a winner for investors. The most obvious is that the company benefits from numerous secular trends. Amazon is able to grow revenue on the backs of online shopping, digital advertising, cloud computing, and artificial intelligence. At the same time, Sirius XM is facing an uphill battle going against streaming services. Another reason is that Amazon's profits are soaring. Operating income jumped 86% year over year in 2024, before rising 20% in Q1. And looking ahead, analysts think Amazon's bottom line will grow at a faster rate than revenue, which underscores the company's ability to optimize costs. Despite the stock crushing the market, the valuation is reasonable. Investors can buy Amazon shares at a forward P/E ratio of 34.1. Given the company's dominance, its ability to constantly innovate and enter new markets, and its renewed focus on profitability, it's time to consider making an investment in Amazon. It can be difficult to forget about a stock that Warren Buffett and Berkshire Hathaway seem to favor. But sometimes it's best to pay attention to the winners that are right in front of you. Amazon is more deserving of your capital than Sirius XM. Should you invest $1,000 in Sirius XM right now? Before you buy stock in Sirius XM, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sirius XM wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $966,931!* Now, it's worth noting Stock Advisor 's total average return is1,062% — a market-crushing outperformance compared to177%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 23, 2025
Yahoo
2 days ago
- Business
- Yahoo
This Ridiculously Cheap Warren Buffett Stock Could Make You Richer
Sirius XM plummeted more than 60% over the past five years, but a low P/E and high yield are just some of its compelling value features. Berkshire Hathaway has been adding to its Sirius XM stake in recent months. It now owns more than 35% of the satellite radio provider. Business is meandering for satellite radio, but the catalysts are there for a near-term turnaround. 10 stocks we like better than Sirius XM › Warren Buffett's track record shows the merit of making long-term bets on high-conviction stocks. He's the epitome of patient investing, and there's one stock his company's been buying lately that seems to be testing every investor's patience. Sirius XM Holdings (NASDAQ: SIRI) has been a market laggard. Shares of the satellite radio provider are down 16% over the past year, and off a portfolio-blistering 59% over the last five years. Despite Sirius seeming to be the equivalent of audio quicksand, Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) added to its existing stake three times over the last eight months. Berkshire Hathaway now owns more than a third of Sirius XM's outstanding shares. It's a big bet with nearly 120 million shares and a stake valued at $2.7 billion. With Buffett set to retire by the end of the year, this radio niche monopoly might even be his final big bet. Is this generation's greatest investor going out with a dud? I don't think so. Let's go over some of the reasons why this cheap and admittedly out-of-favor stock could be a big winner for your portfolio. There's no ignoring the elephant in the room. Satellite radio is experiencing a dip in popularity. This is shaping up to be the third consecutive year of declining revenue for Sirius. While it's still highly profitable, this is the fourth straight year of decelerating operating income. Sirius XM was great two decades ago for driving commuters and the automobile industry, but now the game is changing again. Younger listeners behind the wheel are turning to podcasts and cheaper music streaming apps to provide the soundtrack to their drives. Satellite radio seems to be on a gradual but definite fade out. It doesn't have to be that way. Before shifting gears to cover the potential turnaround here, check out the value. The media stock is cheap no matter where your channel surfing lands. Sirius XM is trading for just 7.7 times this year's projected profitability, and analysts see earnings per share starting to inch higher again next year. Its latest guidance suggests that this should be Sirius XM's 11th consecutive year of generating more than $1 billion in free cash flow. The cherry on top there is that the satellite radio giant is forecasting $1.5 billion in free cash flow in 2027. It's only been that high once in the last nine years. Its popularity is waning right now, but trailing revenue is just 4% below where it was when the top line peaked more than two years ago. Sirius XM also isn't afraid to eat its own cooking, reducing its share count by 48% since its 2013 peak. It's not the only way that the platform operator is returning money to shareholders. The stock's current 4.8% yield makes it one of the biggest payouts in Berkshire Hathaway's public stock portfolio. Sirius XM boosted its quarterly dividend every year since initiating a distribution policy eight years ago. Stocks are typically cheap for a reason. Now let's end on what Sirius XM can do to turn that around. Sirius XM still reaches a massive audience of 33 million accounts. Its current monthly churn rate of 1.6% is within the format's historical range. It's not the pace of cancellations that's gnawing away at Sirius XM's potential, it's the lack of new sign-ups. There are a few potential catalysts that can turn things around. Companies calling folks back in to in-office work should result in more commuters seeking seamless entertainment on congested morning and afternoon drives. U.S. gas prices in May were 12% lower than they were a year ago, so there's not an inflationary pressure point keeping folks from driving for pleasure, either. New car sales are the funnel that feeds into Sirius XM's ecosystem, and that's a problem. The average age of a U.S. passenger car is at a record 14 years. If the economy improves and financing rates come down, there's a lot of pent-up demand for new vehicle sales that should kick in. Sirius XM is also making its own luck. Howard Stern put Sirius on the map almost 20 years ago, and he is keeping the platform's core audience in place. Sirius XM is now investing in a deeper bench of trendy personalities to woo younger audiences. Ripping a page out of the Spotify playbook, Sirius XM struck deals with popular podcasters to boost listenership and engagement. It's already starting to pay off for its audience of roughly 70 million listeners across those 33 million accounts. A bright spot in its latest financial update is that podcast ad revenue surged 33% in its latest quarter. The future isn't as dreary as the bears might think here. Berkshire Hathaway's throwing more money at Sirius XM in Buffett's final year at the helm, and history should show that the generational investor went out with a bang. Before you buy stock in Sirius XM, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Sirius XM wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $966,931!* Now, it's worth noting Stock Advisor's total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 23, 2025 Rick Munarriz has positions in Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway and Spotify Technology. The Motley Fool has a disclosure policy. This Ridiculously Cheap Warren Buffett Stock Could Make You Richer was originally published by The Motley Fool
Yahoo
11-05-2025
- Business
- Yahoo
Does Warren Buffett Know Something Wall Street Doesn't? Why the Billionaire Investor Owns This High-Yielding Dividend Stock.
Berkshire Hathaway is the largest shareholder of SiriusXM. The company is seeing declining subscribers and big competition from streaming music players. The stock has a ton of debt and looks very risky to buy today. 10 stocks we like better than Sirius XM › Warren Buffett doesn't make many mistakes when it comes to investing, as evidenced by his supreme long-term track record in public markets. He and the team at Berkshire Hathaway (NYSE: BRK.B) seem to have made a mistake by investing in SiriusXM (NASDAQ: SIRI) -- at least, so far. The automotive satellite radio provider is down over 60% in the last five years, while the broad market indices have soared. Today, the stock trades at a price-to-earnings (P/E) ratio of 8 and a dividend yield of 5%. Does Berkshire Hathaway see something in SiriusXM that the rest of the market is missing? Let's dive in further and investigate this fallen internet stock and see if it is a buy for your portfolio today. SiriusXM made its money selling satellite radio subscriptions in conjunction with automotive purchases. Today, this business is facing multiple headwinds with the rise of Spotify, Apple Music, and YouTube taking share from satellite radio for talk and music. Its subscribers stood at 32.86 million last quarter, which is below its user count at the end of 2018. Lower subscriber figures have led to declining revenue, with sales now off 4.4% from all-time highs last quarter. This is coming at a time when the streaming music services such as Spotify are growing like gangbusters, which are putting a world of hurt on SiriusXM's business. With the rise of Google and Apple Car Play, users can stream the same applications in vehicles that they use on their phones, which has disrupted SiriusXM's competitive edge. It has tried to fight back with a stand-alone SiriusXM streaming application, acquiring rights to podcasts, and even acquiring Pandora Radio back in the day. It has not lived up to expectations, with this other segment seeing a 2% decline in revenue year over year last quarter. Management is guiding for $1.15 billion in free cash flow this year, but that is still well below all-time highs set a few years ago. If revenue keeps sliding, free cash flow will eventually disappear. Just because a stock is owned by Berkshire Hathaway does not mean it was a Warren Buffett investment. The company has two investors -- Todd Combs and Ted Weschler -- who manage billions of dollars of investments. One of these investors may be the purchaser of SiriusXM stock instead of Buffett, who at this point only dabbles in investments that can move the needle for the trillion-dollar market-cap stock. At a market cap of just $7 billion, SiriusXM is not going to be a meaningful contributor to Berkshire Hathaway's stock portfolio even if it goes up by 10 times. The company owns $2.8 billion worth of SiriusXM stock. If that stock is worth $28 billion someday, that is barely 2% of Berkshire's market value. A 10 times move upwards is highly unlikely too. With a dividend yield of 5%, you might think SiriusXM stock is a buy just because Berkshire Hathaway owns it. In this case, following Berkshire Hathaway blindly has led an investor to lose money. The problem with SiriusXM is not just its declining subscribers and declining revenue. It is the huge debt load carried on its balance sheet. The company has over $10 billion in long-term debt vs. its $1.1 billion in projected 2025 free cash flow. Free cash flow will decline if revenue keeps sliding. The debt is mostly due before 2030, meaning that SiriusXM is going to have to scramble to pay back these loans or refinance at higher interest rates. Either way, this is not good for shareholders. SiriusXM is a stock with declining revenue and heavy indebtedness in a declining industry. Even with a high dividend yield of 5%, it is best to stay away from this stock. It's unclear what Berkshire Hathaway sees in this business. Before you buy stock in Sirius XM, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Sirius XM wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $617,181!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $719,371!* Now, it's worth noting Stock Advisor's total average return is 909% — a market-crushing outperformance compared to 163% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 5, 2025 Brett Schafer has positions in Spotify Technology. The Motley Fool has positions in and recommends Berkshire Hathaway and Spotify Technology. The Motley Fool has a disclosure policy. Does Warren Buffett Know Something Wall Street Doesn't? Why the Billionaire Investor Owns This High-Yielding Dividend Stock. was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
