It’s been a strange and winding road for Warren Buffett and his investment in Sirius XM Holdings (NASDAQ: SIRI). Buffett originally purchased Sirius stock back in 2016 for around US$192 million. He then went on to sell his entire stake in the stock, reporting a minor loss in the investment in 2021.
However, the tides have changed. Buffett has gone back and bought Sirius stock yet again as of the third quarter of 2023. The price was for US$47.4 million, making this now look like a cheap stock other investors may want to devour as well.
About Sirius stock
Sirius is a satellite radio service provider based out of the United States. And while radio isn’t anything new, the unique part of Sirius stock is the satellite operations. The company has generated consistently positive earnings and free cash flow coming from its subscriptions. This has made it an attractive investment for people like Warren Buffett in this case.
In fact, the renewed purchase is likely because while the company continues to hold market dominance and high performance, it’s undervalued. The main focus could be owing to its unique position as well as recurring revenue, with predictable cash flow.
What’s more, it has become a merger play. Some speculate Buffett got back in by a merger between Sirius stock and Liberty Media. This is another company Buffett invests in, offering more opportunities for him and his company.
Earnings look good
Sirius stock was able to beat out earnings estimates even while many are cutting back on subscriptions. The company reported revenue of US$9 billion during its fourth quarter 2023. Further, it offered net income of US$1.3 billion, diluted earnings per share (EPS) at US$0.32, and free cash flow of US$1.2 billion.
Though, of course, what investors want to know about now is the future. And in this case, there are benefits and challenges. The company has been attempting to expand its content since acquiring Pandora back in 2018. It’s also providing more technological advancements, such as streaming and connected car partnerships.
The key will be to keep customers coming back for more, and that means growing recurring revenue through subscriptions. While it’s likely to be a challenge, Sirius continues to be the main satellite provider. And that advantage seems to be enough for Buffett.
Other analysts
While Warren Buffett has a history of strength, he doesn’t when it comes to Sirius stock. But this stock must have a strong future as well as huge potential if he’s hopped back in. Still, what do other analysts think of the stock?
Most other analysts believe it’s a “hold” right now. Even so, they definitely see the company continuing to hold its dominant market position. Furthermore, customers want more content. Exposure to areas such as audio books, talk radio, and more has proven well for podcasts. This is an area where Sirius could easily enter.
Overall, Sirius stock is certainly one thing: cheap. Shares trade at US$4.71, and at 14.8 times earnings as of writing. And now up 7.75% in the last year, it could be an opportune time to consider jumping back in on this stock. Just like Warren Buffett.
