Sirius XM, a leading North American radio entertainment company, offers live and curated content through satellite broadcasting, including music, sports, drama, talk shows, and news. The company primarily capitalizes on in-car scenarios to maintain stable profitability.
Recently, Berkshire Hathaway, led by Warren Buffett (Trades, Portfolio), increased its stake in Sirius XM by purchasing shares valued at approximately $86.73 million, making it the largest shareholder with 108.72 million shares. This news boosted Sirius XM’s stock price, which surged nearly 13% in after-hours trading to close at $24.93 per share. Despite this, Sirius XM’s stock has fallen over 54% this year due to challenges in subscriber growth and stagnant revenue.
Berkshire has been incrementally increasing its holdings in Sirius XM throughout the year, with significant purchases in March and April totaling over $860 million. Currently, it holds a 32% stake in the company. Sirius XM was formed in 2008 from the merger of Sirius Satellite Radio and XM Satellite Radio. In 2023, Liberty Media, owned by billionaire John Malone, emerged as a major shareholder, possessing 83% of Sirius XM shares, partly through Liberty SiriusXM Group's (LSXM) tracking stocks.
Last September, Malone decided to spin off LSXM and merge it with Sirius XM to form a new public company, retaining the Sirius XM name and brand, and issuing a new single series of common stock under the ticker "SIRI." The merger resulted in LSXM shares being converted to Sirius XM shares at a 1:0.8375 ratio, elevating Berkshire to the position of the largest shareholder.
Market analysts suggest that Berkshire’s increased investment might be a strategic move to diversify its media and technology portfolio. Managed by Ted Weschler, one of Buffett’s key successors, Berkshire is drawn to Sirius XM's attractive valuation, with a price-to-earnings ratio of 8.21, indicating potential value.
However, Morgan Stanley analyst Sebastiano Petti recently rated Sirius XM as "Underweight," setting a price target of $20. Petti cited concerns over low EBITDA growth prospects, high capital expenditures, and the suspension of stock buybacks as ongoing challenges for the company.
