Berkshire Hathaway, led by Warren Buffett (Trades, Portfolio), has significantly increased its stake in satellite radio company Sirius XM (SIRI, Financial) by purchasing 3.6 million shares worth approximately $87 million. This move has raised Berkshire's total holdings in Sirius XM to about 108.7 million shares, representing a 32% ownership stake.
The recent stock acquisition took place over three days last week at an average price of around $24.50 per share. The investment was made predominantly through acquiring Liberty Sirius XM, which merged with Sirius XM earlier this year. Despite Berkshire's increased investment, Sirius XM's stock has faced challenges, with its shares dropping approximately 55% year-to-date, although there was a slight increase of 2.6% recently, bringing the price to $24.93.
Investors have shown concerns regarding Sirius XM's slight decline in self-paying subscribers, stagnant revenue, an aging user base, and $10 billion in debt. The company, which has 31.5 million self-paying users, is primarily used in cars but is seeking to expand its platform.
The management of Berkshire's stake in Sirius XM is attributed to investment manager Ted Weschler, who oversees the company's $300 billion stock portfolio alongside Buffett. Sirius XM is trading at a low valuation of roughly eight times its expected 2025 earnings per share of $3.10 and offers a dividend yield of over 4%.
JPMorgan analyst Sebastiano Petti recently resumed coverage of Sirius XM with a "underweight" rating and a target price of $20, citing concerns over flat EBITDA prospects, high capital expenditure, and a pause in stock buybacks, which may not resume until 2027 due to the company's focus on reducing debt.
Chairman Greg Maffei mentioned that Buffett is a fan of the platform and enjoys listening to the Siriusly Sinatra channel while driving. This reveals Buffett's personal affinity for the service, beyond its financial appeal.
