By Sirius XM Holdings Inc. (NASDAQ: SIRI) is experiencing upward momentum on Monday following the news that Warren Buffett has acquired additional shares of the satellite radio provider.
The “Oracle of Omaha” invested $87 million to purchase 3.6 million shares of the broadcasting company between October 9th and October 11th, according to a securities filing released this morning.
Buffett’s conglomerate, Berkshire Hathaway Inc., has been invested in Sirius XM since 2016, and following this recent purchase, it now owns approximately 32% of the company based in Englewood, Colorado.
While markets often take Buffett’s moves seriously due to his legendary status in finance, I have some reservations about investing in Sirius XM stock.
Sirius XM stock has underperformed for years
Sirius XM executed a 1-for-10 reverse stock split in September to rise above penny stock status.
This is a red flag, as reverse splits are generally viewed as a sign of weakness. Consequently, the market reacted negatively to the company’s move.
Moreover, Sirius XM’s downtrend has not been limited to weeks or even months; the Nasdaq-listed firm has underperformed the market for years.
Increasing competition from platforms like Spotify, coupled with lackluster subscriber growth, makes Sirius XM stock appear unattractive to me.
The number of self-pay subscribers declined by a staggering 100,000 in the company’s latest reported quarter.
SIRI recently lowered expectations for free cash flow
Although Sirius XM offers an appealing dividend yield of 4.27% at present, which may attract income investors like Warren Buffett, one must question whether dividend payments alone can outweigh other concerns.
This is particularly relevant given that the satellite radio company has lowered its expectations for full-year free cash flow from $1.2 billion to $1.0 billion.
This revision followed a 3.0% decline in revenue during its second financial quarter.
Additionally, Howard Stern is expected to retire in the coming year, which may also negatively impact the company’s share price in 2025.
Notably, Wall Street does not fully align with Warren Buffett regarding Sirius XM shares either.
The consensus rating on the Colorado-based company currently stands at “hold.”
However, analysts have set an average price target of $30 for the Nasdaq-listed firm, indicating a potential upside of nearly 20% from its current price.
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