Today, the Warren Buffett-backed stock is experiencing a significant surge – here's the reason behind it.
On a thriving market day, Thursday saw a notable rise for Sirius XM (SIRI 1.63%). By 10:10 a.m. ET, the stock had climbed an impressive 6% for the day, setting it apart as a standout performer.
The reason behind this surge lies in Sirius XM's fourth-quarter and full-year 2024 results, which were announced in the morning. The company surpassed expectations in both earnings and revenues, but there's more to this tale.
Boost in Subscribers and Profitability
The self-paying subscriber base saw a significant addition of 149,000 in the fourth quarter, a testament to the company's success. Although the overall self-pay subscriber count decreased year-over-year, this growth is undeniably promising.
Additionally, the cost-saving initiatives are progressing as planned, and Sirius XM targets another $200 million in annual savings by the end of 2025. The company's free cash flow increased by an impressive 28% year-over-year in the fourth quarter. Furthermore, programmatic podcast ad revenue soared with a "double-digit" percentage growth in 2024.
Valuation and Growth Potential
Sirius XM's stock is presently trading at a remarkably low valuation of less than 7 times its projected free cash flow, making it an appealing investment opportunity. The company also boasts a low price-to-book ratio of 0.73, a characteristic that value investors often seek out.
Several intriguing growth initiatives are in the works, aimed at rekindling growth. Berkshire Hathaway, Warren Buffett's holding company, has invested heavily in Sirius XM, owning a substantial 35% stake. If the company's executives can effectively implement their strategy and reach their aim of $1.5 billion in free cash flow by 2027, this stock could prove to be a brilliant investment.
In light of the impressive financial results, many investors might find Sirius XM an attractive option for their investment portfolios, given its low valuation of less than 7 times its projected free cash flow. The company's finance department has also implemented cost-saving initiatives, aiming to achieve an additional $200 million in annual savings by 2025.
Given these financial improvements and the backing of a renowned investor like Warren Buffett and his company Berkshire Hathaway, which holds a 35% stake in Sirius XM, many individuals might consider investing their money in this finance sector.
