Berkshire Hathaway Invested Heavily in SiriusXM. Why?

Berkshire Hathaway Inc (NYSE:BRK.B) increased its stake in SiriusXM Holdings Inc. (NASDAQ: SIRI) last week, to the degree that BRK.B now holds about a 32% stake of the company.

Naturally, such an investment led to a few effects for the stock and questions for investors, including…

• SIRI’s price jumped heavily as a result of this, rising about 16% in the last week (chart above, courtesy TradingView)
• There is now an effective debate between analysts on whether the buy (and other factors) could cause a surge for the stock or whether the numbers still aren’t there for the satellite radio service provider.
• Will the media and analyst coverage about SIRI cause a surge?
• Why did BRK.B invest in the first place?

Some of the questions remained unanswered, but there are some likely answers to why Berkshire made such a bold move. After all, what’s the future of premium satellite radio service in the age of unlimited digital content? Some reasons and theories include:

• SIRI has fallen about 50% this year so far, and after the rise from the massive purchase, it is still down about 44%. Many investors could think it undervalued.
• SIRI recently acquired a significant show in the form of Alex Cooper’s “Call Her Daddy” podcast. SiriusXM now has exclusive advertising and distribution rights for Alex Cooper’s “Call Her Daddy” podcast. This is a huge opportunity for the company.
• It has dividend payments of 4.3% annually.

If you’re not BRK.B, what reasons might someone have to buy SIRI now? There are still concerns, after all (a stock doesn’t drop 50% in a year for no reason). Revenue declined 0.6% in 2023. Yet at the same time, it has a strong price to earnings ratio of 7.91x, and does better than many other stocks in the entertainment industry. Additionally, some will point to the changing EPS estimate as a sign of at least short-term growth in the future.

Analysts we follow at WallStreetZen currently maintain a Hold consensus. The average price forecast is a 33% increase over the next year, though the minimum forecast has SIRI losing about 25% over the next year. However, often when we look at the average rating of a stock, it’s typically a consensus. With SiriusXM, analysts have strong differing opinions, with 3 strong buys, 2 buys, 3 holds, and 4 strong sells.

The Takeaway: At this point, it might be too late to get on the initial train revolving around the purchase and the price boost for SIRI. 

However, this could be a sign that Berkshire Hathaway thinks that the stock is undervalued after a terrible 2024 thus far and that there is still room for recovery for the satellite radio provider. Nonetheless, there is risk here, and a sure consensus cannot be found regarding the stock’s future performance.

SIRI will be one to watch for at least the rest of the year. We may see further reasons for Berkshire Hathaway’s purchase or further developments from them, and the potentially irrational actions of investors themselves could be the reason for future gains and losses. You’ll want to stay on top of the situation. WallStreetZen Premium can help. With your subscription, you can get news updates on SIRI via Premium’s unlimited watchlist, find alternative picks if SIRI seems too risky for the moment, and more.

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