Sirius XM Holdings (NASDAQ: SIRI) can't seem to catch a break. It posted better-than-expected results late last week, sending the shares 6% higher on Thursday. Wall Street pros weren't convinced. At least three analysts have lowered their price targets on the country's lone satellite radio provider between Friday and Monday morning.
Sirius XM stock took a big hit last year. Is the market's disinterest your opportunity? Let's go over some of the reasons to buy the out-of-favor stock today like there's no tomorrow.
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1. It survived earnings season
Satellite radio and Sirius XM's Pandora platform, which gives it a popular inroad into digital migration, aren't going away anytime soon. Organic growth hasn't clocked in with a year of double-digit growth in the past decade -- turning slightly negative lately -- but it's shaping up to be a long and gradual fade-out, with plenty of time for Sirius XM to turn things around.
Sirius XM reported revenue of $2.19 billion in the fourth quarter, a 4% decline. Earnings per share (EPS) rose 24% to $0.83 a share. Analysts were holding out for a profit of $0.71 a share with $2.17 billion on the top line. It's a beat on both ends of the income statements, and Sirius XM's strongest bottom-line beat in more than a year.
Guidance for the coming year is a mixed bag. Sirius XM is sticking to its earlier forecast of $8.5 billion in revenue; $2.6 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA); and $1.15 billion in free cash flow for all of 2025. This represents declines of 2% and 5% in revenue and EBITDA, respectively, from 2024, but also a 13% jump in free cash flow.
Image source: Getty Images.
2. The Oracle of Omaha has been buying the dip
An unlikely champion for satellite radio has been legendary investor Warren Buffett. Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has been an investor in Sirius XM for a couple of years now. Buffett's holding company also owned some of the Sirius XM tracking shares controlled by majority stakeholder John Malone.
The tracking shares offered a way for Buffett to boost his stake in the satellite radio operator at a discount. When Malone and Sirius XM completed the conversion of the tracking shares into the common stock, Buffett could've cashed out at a premium to his tracking shares. Berkshire Hathaway held on, and added to its stake in October and in December as the shares moved lower.
Berkshire Hathaway now owns more than a third of Sirius XM's outstanding shares. Buffett doesn't always get it right, but it's great to have the legendary investor on your side.
3. Riding the tariff storm out
Sirius XM serves North American customers. There are some Canadian listeners, but more than 90% of its 33 million subscribers are in the United States. At a time when investors are assessing the potential impact of rising tariffs across the companies in their portfolio, Sirius XM should hold up better than most businesses.
This doesn't mean that Sirius XM is immune. Automakers are in the line of fire in this new trade war. This is a big deal, since new-car sales dictate the funnel to new potential subscribers to satellite radio.
There's also the inflationary risks here. It's not just eggs and coffee prices that will move higher in this climate. If inflationary pressures are hitting nondiscretionary purchases, there will be less money for folks to spring for premium satellite radio subscriptions.
However, the other side of the new normal could also benefit Sirius XM. With companies and now federal worker mandates calling employees back to in-office work, folks will be spending more time in their cars. The time spent on satellite radio should go up, which will help Sirius XM with both retention and ad revenue.
4. The stock is cheap
Sirius XM is a well-run business with strong margins even in this recent climate of slightly declining revenue. It's been using its cash to buy back stock and come through with larger quarterly dividends. The stock is currently yielding nearly 5%.
Its subscriber count declined in 2024, but at a slower pace than the year before. Sirius XM's guidance calls for the pace of its revenue decline to also decelerate in 2025. Is the business starting to stabilize here?
If it is able to hold its ground here, the stock could be a bargain. It's trading for less than 8 times forward earnings, and those profit targets inched higher since last week's financial update, despite the bearish analyst moves. Living through the stock's 58% plunge in 2024 was rough and unfortunate, but the entry point today is promising.
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Rick Munarriz has positions in Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
