Sirius XM Faces Challenges Amidst Berkshire Hathaway’s Ongoing Investment
Berkshire Hathaway, led by Warren Buffett, recently reaffirmed its investment in Sirius XM, increasing its stake by 4.2% in Q3 2023. Despite being Berkshire’s 13th-largest holding, Sirius XM has struggled, with shares falling from a pandemic peak of $70 to just over $20. The company now carries a substantial $10 billion in net debt against a $6.8 billion market cap.
Sirius XM’s subscriber base and revenue have declined due to rising competition from streaming services and sluggish auto sales—a key acquisition source for new customers. In Q3 2023, self-pay subscribers fell only 1%, reflecting some stabilization as the company also reported a 1% increase in advertising revenue. Looking forward, Sirius aims to boost its cash flow to $1.50 billion by 2027 and is experimenting with lower-cost, ad-supported service tiers to attract more users.
With potential growth stemming from improved auto sales and a shift towards advertising models, Sirius XM’s stock price might experience significant changes if these factors stabilize. Investors should note that Sirius XM continues to carry a high level of debt, with its valuation sitting at 5.6 times current cash-flow estimates.
