It’s been a tough past couple of years for Sirius XM (NASDAQ: SIRI) shareholders. The stock is trading down by more than 50% since the end of 2022, reaching yet another multiyear low just a few days ago following the release of disappointing 2025 revenue guidance — the company expects its top line to fall during the year ahead.
There’s at least one genius investor who isn’t discouraged, however. That’s Warren Buffett. He’s using the recent weakness as a buying opportunity, in fact, adding another 5 million shares of Sirius XM just a few days ago to Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) existing stake. That purchase pumps the position up to more than 117 million shares worth around $2.7 billion, or roughly one-third of the satellite radio company.
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What’s Buffett seeing that most other investors clearly aren’t? Value, for one. But he’s also arguably seeing the bigger long-term picture that’s otherwise being obscured by near-term turbulence.
You know the company. Sirius XM is the result of 2008’s merger of competing satellite radio names Sirius and XM, creating North America’s singular satellite radio powerhouse with a huge array of exclusive programming.
In retrospect, though, that pairing took shape right at the business’s highest growth. By that point broadband internet connectivity had become the norm, giving rise to streaming music platforms like Spotify and Pandora (which Sirius XM now owns). That period also marked the beginning of the proliferation of smartphones, giving consumers a convenient alternative means of accessing music and talk; Apple‘s iPod and iTunes were still going strong at that time as well. Sirius XM may have still dominated the in-car audio entertainment space then, but it’s been fighting stiff competition on multiple fronts ever since.
Those rivals finally turned the collective tide last year, when Sirius XM’s top line peaked following plenty of pandemic-prompted volatility. Ditto for income and free cash flow.
Data by YCharts.
That’s the big reason shares have been halved in the meantime. Largely lost in the noise, however, is the fact that the company is finally implementing changes that should have been made in earnest years ago.
One of these evolutions is the modernization of the technology that allows advertisers to more effectively advertise via Pandora. In June, Sirius XM announced that Pandora’s self-service AdsWizz engine would integrate with The Trade Desk‘s Unified ID 2.0 tech, offering advertisers an “identity solution with precision targeting, frequency management and measurement.” This sort of granulation and response tracking has become standard within all corners of the web-advertising world.
The Trade Desk introduced similar tech for Sirius XM’s ad-supported programming.
Moreover, recognizing just how competitive the web and its many branches are, Sirius is doubling down where it knows it can win. As part of its strategic update released just a couple of weeks back, the company announced it’s expanding its automotive marketing efforts, concentrating on boosting revenue from the place where 90% of its subscribers utilize the Sirius XM tech embedded in their vehicles.
Going forward, the company’s also making a point of doing something it’s arguably never done quite well enough. That’s weighing the cost of acquiring certain customers, and then prioritizing customers with the highest lifetime value while deprioritizing high-churn prospects. In the meantime, Sirius XM will be spending less and less on capital expenditures outside of its satellite radio operation, from roughly $300 million in 2024 all the way down to nil by 2028.
These fresh efforts won’t bear fruit right away, for the record. Revenue guidance of $8.5 billion for the year ahead is actually down from this year’s expected top line of $8.7 billion, as well as less than analysts’ consensus 2025 estimate of $8.6 billion. EBITDA and free cash flow are also likely to run into a headwind.
Investors looking at these underwhelming stats need to see the bigger picture, though, as Warren Buffett and his lieutenants are. The measures Sirius XM takes now are designed to make the most of this company’s strengths while minimizing its weaknesses.
That’s the bet Warren Buffett is making on Berkshire’s behalf, anyway, although it’s hardly a bet that could be considered a huge risk. Even the analyst community is looking for reaccelerated revenue growth beginning the year after next, paired with even faster earnings growth.
Data source: StockAnalysis.com. Chart by author.
This promising revitalization effort still isn’t the sole reason Buffett is adding more Sirius shares to an already-sizable stake, though. He’s buying more of this ticker when it falls mostly because it’s a bargain, priced at less than 8 times next year’s expected earnings of $3.05 per share and less than 6 times 2026’s earnings estimate of $4 per share. Even for a company that’s in regrouping mode like this one is, that’s cheap; the company’s current headwind already appears to be priced in.
And it’s not like there’s no benefit to jumping in now — even if it’s not clear when improved results might start pushing the stock upward again. Newcomers will be plugging in while the stock’s forward-looking dividend yield stands at nearly 4.7%. You’d be hard-pressed to find another stock with this much potential upside paying this kind of dividend.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Spotify Technology, and The Trade Desk. The Motley Fool has a disclosure policy.
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