Sirius XM Holdings Inc., (NASDAQ: SIRI), is experiencing a strong upward trend on Monday after the news that Warren Buffett acquired additional shares in the satellite radio provider.
According to a filing made this morning, the “Oracle of Omaha”, which is a broadcasting company, invested $87 million between October 9th to October 11th to buy 3.6 million shares.
Berkshire Hathaway Inc. is Buffett’s conglomerate and has invested in Sirius XM, a radio station based in Englewood in Colorado, since 2016. With this recent purchase, Berkshire Hathaway Inc. now owns 32% of Sirius XM.
I am hesitant to invest in Sirius XM because of the legendary status of Buffett in finance.
Sirius XM has been underperforming for years
Sirius XM implemented a 1-for-10 reverse split in September, to move above the penny stock status.
This is a big red flag. Reverse splits are usually viewed as a sign that a company is weak. The market has reacted negatively towards the company’s decision.
Sirius XM has been underperforming the market for many years.
Sirius XM’s stock is not attractive to me because of the increasing competition from platforms such as Spotify, combined with the lackluster growth in subscribers.
The number of self pay subscribers dropped by an astonishing 100,000 in the latest reported quarter.
SIRI has recently lowered its expectations for free cash flows
Sirius XM’s current dividend yield is 4.27%, which may appeal to income investors such as Warren Buffett. However, it is important to consider whether dividend payments can be a sufficient factor.
This is especially relevant, given that the satellite-radio company has lowered their expectations for free cash flow in full-year from $1.2 billion down to $1.0 billion.
This revision was made after a revenue decline of 3.0% during the second financial quarter.
Howard Stern’s retirement is also expected in the next year, which could negatively impact the share price of the company in 2025.
Wall Street is not in complete agreement with Warren Buffett on Sirius XM either.
The consensus rating for the Colorado-based company is currently “hold.”
Analysts have set a price target average of $30 for this Nasdaq listed company, which represents a potential gain of almost 20% over its current price.
This post Warren Buffett Buys More Sirius XM Stock: Here’s Why I Wouldn’t may be updated as new developments unfold.
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