Sirius XM (SIRI +8%) has seen a surge in investor interest following Warren Buffett (Trades, Portfolio)'s recent purchase of approximately $86.7 million worth of shares, increasing his passive stake to 31.01%. This move has driven the stock to levels not seen since its split-off from Liberty Media (LSXMA, Financial) last month. Sirius XM continues to support its recurring dividend and $1.166 billion repurchase program, while maintaining its FY24 revenue guidance at $8.75 billion.
Despite trading near decade lows, Buffett's investment signals confidence in SIRI's potential. Several factors could reshape investor sentiment:
- The split from LSXMA grants SIRI independence, enhancing equity and potentially improving trading dynamics. This separation simplifies SIRI's structure, allowing focus on growth drivers and possibly enabling future index inclusion. The company aims to boost free cash flow for reinvestment, dividends, and debt reduction.
- SIRI faces a crowded market in audio streaming, owning Pandora and partnering with many auto OEMs. Although many new vehicle purchases include a complimentary Sirius XM trial, only about a third of listeners continue their subscription post-trial, with a churn rate of 1.5% as of Q2.
- To address subscription challenges, SIRI launched a free access plan and an ad-supported plan for cars, initially in limited OEMs. The rollout of 360L, an enhanced streaming service offering 10,000 channels, aims to expand volumes. Management highlights its ad-supported service as a key area for car advertising.
Buffett's increased stake has renewed interest in SIRI, despite challenges from competition. With its strong foothold in the automotive sector, improved Pandora monetization, and the 360L rollout, SIRI presents a promising turnaround opportunity.
