Serious on SiriusXM (SIRI): Satellite Radio Still Lives
At face value, it’s admittedly a challenge to build a bullish case for the long-term viability of satellite radio. Indeed, as the popularity and reach of digital streaming platforms grow, satellite as a communications medium looks antiquated by comparison.
That said, a case can also be made that reports of satellite radio’s demise are decidedly premature. When researching for this month’s issue of CTL, for instance, I came across an article under the following headline: “Satellite Radio is Dead.” It went on to explain, “Satellite radio will come crashing down to Earth within the next two years. The newly merged Sirius XM Radio is already living on borrowed time—and borrowed money—and simply will not and cannot survive.”
As it turns out, this article was written way back in 2008, which clearly demonstrates that satellite’s doomsayers have underestimated the medium’s longevity for quite some time. And while Sirius had around 19 million subscribers at the time of the 2008 merger, that metric had grown to over 34 million by the end of last year.
With that said, why should investors believe satellite radio can compete with streaming’s stellar growth? The answer is at once complicated and simple, and I’ll do my best to explain the bullish thesis here. In doing so, I’ll make the case that today’s version of SiriusXM (SIRI) is a worthy stock for the portfolio.
For those unfamiliar with the Sirius story, a little background is in order. As alluded to above, the New York-based satellite and online radio provider was formed by the 2008 merger of Sirius Satellite Radio and XM Satellite Radio. The company also owns a 70% equity interest in Sirius XM Canada, an affiliate company that provides Sirius and XM services in Canada. In 2020, SiriusXM reorganized its corporate structure, making Sirius XM Radio a direct and wholly-owned subsidiary of Sirius XM Holdings.
A big part of the company’s initial growth boom was the result of the SiriusXM receivers being embedded in new cars and offering trial subscriptions to buyers. The partnership with automakers allowed the company to dramatically expand its subscriber base for many years since many drivers converted their free trials into paid subscriptions.
As automobile sales increased, so did the number of potential new SiriusXM subscribers. Sirius also benefited from partnerships with automakers to extend trial periods and integrate its services more deeply into vehicle infotainment systems.
Sirius has also expanded its footprint through M&A, including the acquisition of subscription-based music streaming service Pandora in 2019 for $3.5 billion. The acquisition made Sirius the world’s largest audio entertainment company.
However, sluggish post-pandemic auto sales combined with a downturn in ad sales put stress on the company, leading to declines in Sirius’s subscriber base, monthly active users and listening hours. And while the company’s existing subscribers have shown loyalty, it lost 445,000 self-pay subscribers in 2024 and nearly 300,000 last year.
As part of its strategic turnaround plan, Sirius is focused on improving its core subscription services with a renewed emphasis on its satellite radio business. It also plans on renewing its advertising opportunities while improving operational efficiency. And while the firm has no plans to jettison its streaming service, it has decided to pivot away from this facet of the business in returning its focus to “core revenue-generating segments.” In the company’s own words, it has decided to “double down” on the core automotive subscriber segment, i.e., its in-car listeners.
On this score, Sirius noted recently that 90% of SiriusXM subscribers have the service embedded in-car today, which it says justifies using the company’s resources “to increase retention and capturing additional growth opportunities within this valuable segment that underpins its scaled subscriber base.”
Indeed, Sirius still enjoys popularity among car drivers in the U.S., and the firm is also exploring other avenues including podcasts and additional features to attract new, younger listeners. But make no mistake, the older listener base is key to the firm’s near-term performance. As one SiriusXM customer put it, “We old folks may be listening with pleasure to a shrinking platform, but we may not be alone as tastes change. Folks may yet decide to dig in their heels against the complicated new platforms.”
To put it another way, never underestimate the dual power of simplicity plus habit.
Despite the renewed focus on satellite radio, Sirius hasn’t entirely given up on streaming as a platform. While it has decided to scale back on its formerly heavy emphasis on the medium (due to perceived lower profitability), its strategic plan also involves using streaming as a companion to its core automotive offering. Per a recent company statement:
“SiriusXM will also utilize the streaming platform for automotive distribution where beneficial, both in support of the Company’s growing population of IP and satellite enabled vehicles with 360L and as evidenced by its recent inclusion in the 2024 Tesla Holiday Update.”
As management has noted, by integrating the company’s streaming solution into Tesla’s IP-enabled operating system, Sirius is “rapidly expanding” access to its service to more than two million vehicles already on the road, opening up a valuable new segment of its core audience in some of the most popular vehicles in North America.
Yet another aspect of the turnaround strategy involves creating what Sirius calls “unrivaled content.” This is what most analysts believe is a key aspect to reigniting the company’s growth prospects. As Sirius itself observes, its biggest competitive advantage remains its premium, exclusive, live and on-demand content from its roster of top talent and subject-matter experts.
To this end, it plans to “continue cultivating deep connections between fans and hosts, with future investments centered on the major differentiators that resonate with its core, including: its human curated and hosted music channels, unmatched depth and breadth of live sports, extensive bench of leading audio talent, and growing podcast network.”
In order to retain its trial subscribers and attract new ones, Sirius is turning to the subscription model by offering several package offerings. Each of them is advertised as being a comprehensive, content-rich product ranging from $11 to $22 per month. Moreover, the company’s latest content offerings will include a music-only tier for just $8 a month, with news and talk each available for $5 and a sports-related tier for $8.
As part of its plan to lure back former customers who happen to be decidedly more cost-conscious, Sirius is offering a free ad-supported tier. (It’s currently available only in vehicles with certain technology capabilities and won’t be available on the Sirius XM app.) But with the increasing sales of newer, tech-enabled vehicles, analysts expect this strategy to increase the company’s subscriber base.
Then there’s the cost-reduction aspect to the plan, which involves reducing costs across several of its business segments, as well as a period of “high re-investment” in product infrastructure. To achieve this, Sirius intends to scrutinize the lifetime value of subscribers, optimize marketing efforts for higher returns and closely monitor the return on technology investments to drive greater operational efficiency and enhance the listener experience.
As part of its latest effort in executing on the latter strategy, Sirius became an independent public company (last September) after completing a transaction with Liberty Media, simplifying its capital structure and positioning itself for future growth. The company believes this move will allow it to more easily realize its aims of strategic growth and expansion.
On the management front, Sirius also recently appointed Wayne Thorsen as Executive Vice President and COO to oversee product and technology functions, as well as aspects of its commercial activities. Thorsen formerly served at ADT Inc. (ADT) as its leader of product management, engineering, business development and several other key functions, and his leadership was instrumental in accelerating ADT’s growth strategy.
Significantly, along with operational efficiency throughout ADT, Thorsen guided the firm’s shift into AI with partnerships with Google and Sierra. This is another area where Sirius plans to execute its turnaround strategy, namely by utilizing AI and infusing it throughout its offerings.
Already, it uses AI to personalize the listener experience, including recommendations and content discovery. It also uses Salesforce’s Data Cloud to bring together data, activate relevant data and generate content. And it uses AI to reduce costs and improve business efficiencies.
Sirius has also partnered with automotive AI company Cerence (CRNC) and conversational AI firm Sierra to develop voice controls to assist Sirius users. These partnerships have facilitated a voice-powered onboarding experience for new SiriusXM users, along with an AI automotive assistant to learn about users’ preferences, while offering music and podcast recommendations.
In terms of new content creation, SiriusXM has been investing on that front in order to strengthen its market position. Last August, for instance, the company signed a $125 million deal with Alex Cooper, host of the enormously popular “Call Her Daddy” podcast, which consistently ranked as one of the most listened-to podcasts on Spotify (averaging a number-two ranking). In signing a three-year deal with Cooper, Sirius transitioned her show from Spotify to SiriusXM beginning in February.
Additionally, Sirius has recently signed new agreements with other popular podcast hosts, including an exclusive deal with Dirty Mo Media, the multimedia content platform of NASCAR Hall-of-Famer Dale Earnhardt Jr., which includes exclusive advertising and distribution rights to Dirty Mo’s programming. Sirius has also signed with Adams and Rafferty to create a new original podcast series about their time on the widely watched TV show, Suits. And it just inked a multi-year deal with podcast host and best-selling author Mel Robbins, including an exclusive new weekly show to premiere this year.
A not-insubstantial support for Sirius bull’s case involves a certain high-profile investment in the company by none other than Berkshire Hathaway’s (BRKB) Warren Buffett. As of February, Berkshire owns more than a third of SiriusXM through a series of transactions that began in 2016, when it first bought Liberty Media’s tracking stocks. Since then, Buffett has been piling into Sirius in what some analysts see as a likely merger arbitrage play.
In early February, the Nebraska-based conglomerate purchased around 2.3 million Sirius shares for about $54 million in separate transactions, according to SEC filings, bringing its ownership stake to around 35%. This is particularly noteworthy given that Buffett has been a net seller of stocks in recent quarters.
When plunging into an investment of this nature, it’s always encouraging to have the added benefit of “smart money” players who are also in the proverbial water—especially when one of them happens to be something of a “whale.” And while the sailing ahead is unlikely to be smooth for Sirius, there’s a lot to like about this story overall.
Background:
SIRI came public in 1994 at 45 a share and, after a couple of years of base building, took flight during the late ‘90s tech boom before eventually peaking at a record high at 700 in early 2000. From there, shares cratered during the “tech wreck” before eventually bottoming out around 5 in late 2002. After this, the stock made it back up to almost the century mark in 2005, but investors soured on it once again and pushed it back down to its all-time low during the credit crisis years.
The stock’s performance since 2009 has been equally uneven, with SIRI hitting a multi-year high at 80 in 2021, and again (briefly) in 2023. It has been under pressure in the last couple of years—especially in light of the highly publicized subscriber count woes—but is now in the midst of establishing what I regard as a viable bottom.
SIRI is in the early stages of its strategic rebound initiative, and I think it can also be viewed as a worthy income stock. And should the broad market enter turbulent times in 2025 (as many investors anticipate), SIRI could also be regarded as something of a wealth preservation play.
The window for this potential turnaround is roughly 12 to 24 months, and while I don’t anticipate SIRI to return to the heady days of 2016 to 2018 (the last time it could be considered a momentum stock), I see upside potential to potentially the 40 area in the intermediate-term outlook.
Recommendations
Purchase Recommendation: SiriusXM Holdings (SIRI)
1221 Avenue of the Americas
New York, NY 10020
Web Site: http://www.siriusxm.com
Symbol: SIRI
Market Cap: $8.4 Billion
Category: Mid-Cap
Business: Audio Entertainment
Revenues (2025e): $8.5 Billion
Earnings (2025e): $1.4 Billion
2/26/25 Price: $24.75
52-Week Range: $20.50-$47.80
Dividend Yield: 4.3%
Price target: $40
Analysis:
Last year’s merger with Liberty Media put some pressure on Sirius’s financials, thanks largely to a $3.5 billion restructuring charge, but also due to subscriber losses and unfavorable demographic shifts. This resulted in a net loss of $2.1 billion in 2024, which was down from its $988 million profit in the prior year.
This has had a material impact on sentiment toward the stock, as last year’s nearly 60% decline in the share price pushed it firmly out of favor. In fact, out of 16 Wall Street analysts who cover Sirius, only three gave it a buy rating in the latest quarter, according to FactSet. But from the contrarian perspective that we favor, this paints a useful backdrop for the shares to turn the corner due to rock-bottom expectations.
In the recently released Q4 results, Sirius posted revenue of $2.2 billion that declined 4% year-on-year, but rose 1% sequentially, while beating consensus estimates. Earnings of 81 cents a share were also lower from a year ago but beat estimates by 9%.
For full-year 2024, Sirius delivered on its public guidance with $8.7 billion in total revenue, $2.7 billion in adjusted EBITDA and just over $1 billion in free cash flow (FCF). Additionally, Sirius added approximately 150,000 self-pay subscribers in the quarter and ended the year down less than 300,000, which was a significant improvement over 2023.
Also worth mentioning is that the company delivered an aggregate of about $350 million of run-rate savings in both 2023 and 2024. It also plans an initial incremental $200 million in annualized savings for 2025.
Looking ahead, the top brass provided an outlook for 2025 that included a projection of $8.5 billion in revenue (roughly in line from last year if realized), $2.6 billion in adjusted EBITDA (down 4%) and, significantly, $1.2 billion in FCF (up 20%). On the FCF score, Sirius is aiming to increase free cash flow conversion from around 37% last year to approximately 44% in 2025, with a target of $1.5 billion in FCF by 2027.
Indeed, Sirius is renowned for generating strong free cash flows, which allows it to pay dividends and buy back shares. The company currently offers a 4.3% dividend yield at eight times earnings, and the company’s return on its payout is more than triple that of the average S&P 500 stock, making it a potentially strong choice for income-oriented investors.
What’s more, the stock’s low P/E ratio increases the likelihood Sirius can grow (intermediate to longer term) from a rising earnings multiple. BUY
The chief analyst of the Cabot Turnaround Letter does not yet personally hold shares of every company on the Current Recommendations List, but that will change over time subject to the following guidelines. The chief analyst may purchase securities discussed in the “Purchase Recommendation” section or sell securities discussed in the “Sell Recommendation” section but not before the fourth day after the recommendation has been emailed to subscribers. However, the chief analyst may currently hold and may purchase or sell securities mentioned in other parts of the Cabot Turnaround Letter at any time.
Performance
The following tables show the performance of all our currently active recommendations, plus recently closed out recommendations.
| Recommendation | Symbol | Rec. Issue | Buy Issue | Current Price | Total Return | Current Yield | Rating and Target |
| General Electric | GE | Jul-07 | 195 | 200 | 3% | 0.70% | Hold (210) |
| Berkshire Hathaway | BRK/B | Apr-20 | 183.2 | 479 | 155% | 0% | Hold |
| Brookfield Reinsurance | BNT | Jan-22 | 61.3 | 58.8 | -4% | 0% | Hold |
| Janus Henderson Group | JHG | Jun-22 | 27.2 | 42 | 54% | 3.70% | Hold |
| Agnico Eagle Mines Ltd | AEM | Nov-23 | 49.8 | 96.1 | 93% | 1.70% | Hold |
| Alcoa Corp. | AA | Oct-24 | 39.25 | 34.4 | -12% | 1% | Hold (50) |
| Centuri Holdings | CTRI | Oct-24 | 18.7 | 18.7 | 0% | 0% | Hold |
| Atlassian Corp. | TEAM | Oct-24 | 188.5 | 286 | 52% | 0% | Hold |
| American Airlines | AAL | Oct-24 | 13.6 | 15.25 | 12% | 0% | Hold (20) |
| Starbucks | SBUX | Nov-24 | 99.25 | 112 | 13% | 2.20% | Buy (118) |
| SLB Ltd. | SLB | Nov-24 | 44.05 | 41.75 | -5% | 2.70% | Buy (55) |
| Toast Inc. | TOST | Dec-24 | 43 | 37.7 | -12% | 2.70% | Buy (70) |
| Teladoc Health | TDOC | Dec-24 | 10.7 | 11.5 | 7% | 0.00% | Buy (16) |
| Paramount Global | PARA | Dec-24 | 10.45 | 11.5 | 10% | 1.70% | Buy (14) |
| UiPath | PATH | Jan-25 | 13.85 | 13.5 | -2% | 0.00% | Buy (18) |
| Pan American Silver | PAAS | Feb-25 | 24.2 | 24.5 | 1% | 1.60% | Buy (30) |
| Vestis Corp. | VSTS | Feb-25 | 16.1 | 13.1 | -18% | 1.10% | Buy (22) |
| SiriusXM Holdings | SIRI | Mar-25 | 24.75 | 24.75 | 0% | 4.30% | Buy (40) |
Most Recent Closed-Out Recommendations
| Recommendation | Symbol | Category | Buy Issue | Price At Buy | Sell Issue | Price At Sell | Total Return(3) |
| Fortrea | FTRE | Small | Jan-25 | 18.65 | Feb-25 | 16.3 | -13% |
| Fidelity National | FIS | Large | Dec-25 | 55.5 | Feb-25 | 73 | 32% |
Notes to ratings:
1. Based on market capitalization on the Recommendation date.
2. Total return includes price changes and dividends, with adjustments as necessary for stock splits and mergers.
* Indicates mid-month change in Recommendation rating. For Sells, price and returns are as-of the Sell date.
** BNT return includes spin-off value in BAM shares.
*** GE total return includes spin-off value of GEHC shares at January 6, 2023 closing price to reflect our sale.
**** Indicates a partial sell.
The next Cabot Turnaround Letter will be published on March 26, 2025.
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