Sirius XM (SIRI), a leading audio entertainment platform, has caught the attention of Warren Buffett’s Berkshire Hathaway, which recently boosted its stake in the company with an $86.73M investment. After a rough few years, Sirius XM has been on a transformative journey, becoming an independent public company in September. The firm’s future growth potential is uncertain due to unpredictable long-term self-pay subscriber growth, yet it holds a durable position in the U.S. audio market.
The stock is down 35% over the past 90 days, though Sirius is set to report its first results post-independence on October 31, which could act as a catalyst to move the share price. Investors interested in value-oriented opportunities with potential upside might find this an interesting inflection point.
Berkshire Hathaway Increases its Stake in Sirius
Sirius XM Holdings is a significant player in the audio entertainment industry, operating in two main segments, Sirius XM and Pandora. Services are available through subscription fees and can be accessed via satellite radio systems, mobile and home devices, and other consumer electronic equipment.
The Sirius XM segment offers a range of services, from music to podcasts and infotainment services. The Pandora and Off-platform segment operates a music, comedy, and podcast streaming platform and offers advertising services.
In recent events, Warren Buffett’s Berkshire Hathaway has shown significant interest in Sirius XM. The company bought an array of shares from SiriusXM, amounting to $86.73M, and subsequently increased its total stake to 108.72M shares. Berkshire initially disclosed a stake in Sirius XM in November 2023.
Analysis of Sirius’ Recent Financials
The company’s most recent financials for Q2 2024 showed a 3.1% year-over-year decline in revenue, with $2.18 Billion falling short of analysts’ expectations by $10 Million. This was mainly attributable to a notable downturn in SiriusXM’s self-pay subscribers in the second quarter. The company saw a decrease of approximately 100,000 subscribers, which may impact future revenues if the trend continues. The GAAP earnings per share (EPS) of $0.80 beat estimates by $0.03.
With the release of Q2’s results, SIRI’s management issued financial guidance for 2024. Their projections for a total revenue of around $8.75 billion are slightly below the general consensus of $8.77 billion. Furthermore, the firm anticipates an adjusted EBITDA of approximately $2.70 billion and a free cash flow of roughly $1.20 billion. With SiriusXM becoming an independent public company following its transaction with Liberty Media, it’s expected to report its first results since then on October 31. Investors will be keen to see if there are any significant revisions to this outlook.
What Is the Price Target for SIRI Stock?
The stock has been downward, shedding 47% in the past year. However, it has rebounded, climbing roughly 8% in the past week. It trades near the lower end of its 52-week price range of $22.73 – $57.80 and, despite the recent rebound, shows negative price momentum by trading below the 20-day (26.06) and 50-day (28.53) moving averages. It trades at a significant relative value, with a P/E ratio of 7.55x, sitting well below the Entertainment industry average of 31.1x.
Analysts covering the firm have broadly divergent opinions on SIRI stock. For instance, JPMorgan (JPM)) recently resumed coverage of Sirius XM with an Underweight rating and a price target of $20. At the same time, Benchmark analyst Matthew Harrigan has issued a Buy rating with a price target of $65 to $43.
SiriusXM Holdings is rated a Hold overall, based on the recent recommendations of 12 analysts. The average price target for SIRI stock is $31.71, representing a potential upside of 27.20% from current levels.
SIRI in Summary
Sirius XM has garnered significant attention with a recent investment from Warren Buffett’s Berkshire Hathaway. The company’s recent transition to an independent entity has investors buzzed for its imminent first results post-independence. Meanwhile, the stock trades at a discount to industry peers, broadening its potential appeal for value-oriented investors.
