Predicting the Position of Sirius XM Shares in the Coming Year
In the span of a year, Sirius XM Holdings (SIRI) shares experienced a substantial drop, shedding over half of their value. Despite a 16% rebound this year, the stock is still down 44% overall. While it may seem that the audio entertainment industry is a flop for investors in this digital age, reuniting with the success of Spotify argues against this notion.
Spotify saw its stock prices more than double in 2024 and soar over 40% this year. Sirius XM isn't left in the dust, though. Although often tied to live, in-car radio, the platform is also accessible for streaming live or on demand. Furthermore, Sirius XM owns streaming audio pioneer Pandora Music.
While challenges abound, should Sirius XM defy expectations and flourish in the year ahead, here are a few aspects to consider:
Departing Voice
A potential game-changer might be the departure of Howard Stern from Sirius XM at the end of this year. The polarizing broadcasting legend, who validated satellite radio 19 years ago, is nearing the end of his current contract. Following the completion of his contract, Stern may decide to hang up his headphones.
Although this might trigger a stream of subscriber exits, the Stern catalog will still be available to Sirius XM until 2027. After that, Stern reruns will still satisfy the show's loyal audience, but the allure of fresh, live content may be missing. Lord knows Roger and die-hard Stern fans wouldn't be satisfied with replays, no matter how entertaining!
Indeed, Sirius XM has stockpiled popular podcast hosts and radio personalities, presumably in anticipation of Stern's departure or a bid to appeal to younger listeners—the elusive demographic that's proven hard to snag.
Navigating a Rough Road
Over the past two years, Sirius XM has seen revenue and subscriber numbers slowly erode. Sirius XM anticipates a 2% decline in revenue and a 5% drop in the number of subscribers in 2025. This is far from a death knell, as the company's recovery may still be on the horizon.
Opportunities on the Horizon
The rise of remote work has put Sirius XM in a unique position. As a platform consumed primarily in vehicles, more time on the road could heighten interest in satellite radio subscriptions. For as long as gas prices stay reasonable and vehicles continue to need repair, there's a potential influx of new trial subs, which can only bolster Sirius XM's subscriber base.
To kickstart growth, Sirius XM has wisely invested in popular podcasts like "Call Me Daddy" and "SmartLess" to win over younger listeners who find traditional radio stale. A resurgence in car sales would drive interest in satellite radio, ensuring that Sirius XM can capitalize on young listeners' embrace of the medium.
The Good Company Keeps
No list of Sirius XM's potential saviors would be complete without mentioning Warren Buffett and Berkshire Hathaway, who own nearly a third of Sirius XM stock. Despite the stock's slide in 2024, Berkshire Hathaway purchased additional shares in October and December. Buffett's confidence in the company's turnaround prospects increases the likelihood of excellent returns for Sirius XM shareholders.
Even if Sirius XM cannot rebound by the close of 2025, the company's stock remains affordable. With a low price-to-earnings ratio of 8.6 and a dividend yield of 4%, Sirius XM offers investors a generous payout that has consistently grown in the past eight years.
Of course, experts anticipate modest earnings growth in 2026, but achieving that milestone may necessitate increased subscriber counts and revenue.
Regardless of the road ahead, Sirius XM's market position and Buffett's bullishness indicate that the company has a fighting chance of becoming a successful market player in the coming years.
- Investors looking towards the future of Sirius XM might find potential in the company's diverse offerings, such as streaming audio through Pandora Music, despite the challenges faced by the audio entertainment industry.
- In light of the anticipated decline in revenue and subscriber numbers in 2025, investors should consider the impact of the rise of remote work, which could potentially increase interest in satellite radio, leading to a boost in new trial subscriptions.
- Despite the departure of Howard Stern at the end of the year, Berkshire Hathaway, led by Warren Buffett, owns nearly a third of Sirius XM stock and continues to invest, showing confidence in the company's potential for future growth and returns for shareholders.
- In a digital age, investors might be interested to know that Spotify's stock saw significant gains in 2024, more than doubling in price and soaring over 40% this year, offering a potential example of success for the audio entertainment industry.
