Warren Buffett Is Buying a Stock That Has Only 3 ‘Buy’ Ratings From Analysts — Here’s Why
Written by
Terence Loose
Edited by
Amber Barkley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Warren Buffett, one of the most respected investors of all time, is famous for his ability to pick winners and his reliance on bluechip, rock solid companies. For instance, he’s well known for touting such companies as Coca-Cola and McDonald’s.
So it took a lot of Buffett-watchers by surprise when, last fall, he increased Berkshire Hathaway’s position in Sirius XM (SIRI). The stock was down 48% in 2024, resulting in only three analysts giving it a buy rating.
Apparently unfazed by the decline, Buffett bought another $54 million worth of stock in February of this year, even with Sirius XM projecting a 2% to 2.5% drop in revenue in 2025 — after a 3% drop in 2024. That brought his position up to approximately $119 million as of March, according to Investor’s Business Daily.
So why is the Oracle of Omaha so bullish on the company’s future at a time when analysts say young car buyers prefer pairing their streaming music, podcast and audiobook choices to their cars rather than tuning into satellite radio? Here are four possibilities.
Also, here’s some simple investing advice from Buffett that beginner investors can follow.
It’s Trading Cheap Compared to Expected Future Earnings
Buffett likes bargains, and as of early March, Sirius XM was trading for below eight times forward earnings. For a consumer stock, that’s priced low, even with its projected drop in revenue. Buffett could be seeing that as attractively undervalued.
A Healthy Dividend
Buffett also likes dividends, and Sirius XM has a generous one. As of the middle of March, the company paid a 4.66% annual dividend yield. That’s about $5.5 million in the bank. Chump change for most billionaires, but for a man who famously used change to buy breakfast at McDonald’s for years, probably attractive.
$1 Billion in Free Cash Flow
Free cash flow is the money a company has after paying for basic operating expenses and capital investments, and Sirius XM has a lot of it — consistently over $1 billion annually.
That’s probably attractive to Buffett because it means the company can be bullish on things like paying dividends, buying back stock, paying down debt or investing in growth. He could see that as a sign of future health and profitability.
Low Subscriber Churn
Although Sirius XM is projecting a small drop in revenue for 2025, its subscriber base seems quite strong. It revealed that 76% of its total revenue comes from subscriptions, with a low churn — below 2%. This could give Buffett faith in the future of the company.
More From GOBankingRates
