Sirius XM: A Static Transmission

by

One observes the hesitancy, the spectral hand hovering over the precipice of investment. Sirius XM Holdings (SIRI +0.35%) presents itself, not as an opportunity, but as a condition. A persistent signal in a landscape increasingly saturated with noise. The allure is evident, yet shadowed by a familiar disquiet. The reasons for consideration, I shall delineate. The impediments, I anticipate, already weigh upon the prospective investor.

The numbers themselves offer no solace, merely a catalog of diminishing returns and shifting sands. Subscriber counts, once a source of complacent satisfaction, have begun a slow, inexorable decline. The logic, on the surface, is irrefutable. Why pay for a curated stream of static when an infinite ocean of free, if chaotic, audio awaits? The question, however, is not one of logic, but of acceptance. Of resignation to a predetermined outcome.

Let us proceed, then, to the enumeration of reasons – or, more accurately, justifications – for engaging with this peculiar entity. Today, if one insists. The illusion of agency must be maintained, even in the face of overwhelming futility.

1. The Persistence of Revenue

The criticisms are, of course, valid. The peak subscriber count of 34.9 million, reached in 2019, remains a distant, unattainable horizon. Revenue, too, crested three years later, at $9 billion. The continued generation of income amidst eroding subscriptions is a paradox, a glitch in the otherwise predictable system. It suggests a process of slow, internal decay, a gradual draining of resources, rather than a catastrophic collapse.

The key lies in the incremental increase of Average Revenue Per User (ARPU). Despite a constant barrage of promotional offers – a desperate attempt to retain the dwindling audience – the rates continue to creep upwards. More significantly, the platform has become adept at selling its available advertising space, extracting value from the very void created by the departing subscribers. Monthly ARPU has risen from $13.82 in 2019 to $15.19 in the latest quarter – a negligible increase, perhaps, but a confirmation that the machinery, however rusted, continues to function.

The decline, six years in the making, has been remarkably slow. The platform still serves 33 million subscribers, a mere fraction below its former glory. Trailing revenue, despite three consecutive years of decline, stands at $8.55 billion, only 5% below its 2022 peak. This is not a collapse, but a prolonged, agonizing fade. The company, too, is engaged in a series of operational improvements – minor adjustments to a fundamentally flawed system, perhaps, but adjustments nonetheless.

The result is a persistent profitability, a steady stream of free cash flow exceeding $1 billion annually, with forecasts predicting a further increase to $1.5 billion by 2027. This is not prosperity, but a prolonged state of suspended animation. A waiting, for something that may never arrive.

2. The Expanding Content Void

Howard Stern, a name synonymous with Sirius XM for two decades, remains tethered to the platform. The rumors of his departure, following the completion of his fourth five-year contract, proved to be unfounded. A new three-year deal has been struck, ensuring his continued presence through at least the end of 2028. A temporary reprieve, perhaps, but a reprieve nonetheless.

In anticipation of Stern’s eventual departure, the platform has entered into agreements with various podcasters and show hosts. Alex Cooper, the stars of Smartless – names unfamiliar to many, yet strategically chosen to attract a younger audience. A desperate attempt to fill the void, to replace a singular voice with a chorus of substitutes. The platform, as a result, has never been more complete – or more fragmented.

3. The Distribution of Obligation

This once speculative penny stock has evolved into a generator of income. Quarterly distributions were initiated in 2016, and have increased annually ever since. The stock’s recent pullback, coupled with the growing payouts, has resulted in a current dividend yield of 5.3%. A modest return, perhaps, but a confirmation that the system continues to extract value, even as it decays.

There is room for further growth. The stock’s profitability, coupled with its undervalued status, provides ample opportunity for increased payouts. The dividend payout ratio currently stands at 31.7%, meaning that less than a third of its earnings are used to cover shareholder checks. A comforting statistic, perhaps, but one that obscures the fundamental absurdity of the entire enterprise.

Share buybacks have also been implemented, reducing the diluted share count by 49% since 2012. A futile attempt to enhance per-share profitability, perhaps, but an attempt nonetheless.

Loading widget...

4. The Legacy of Indifference

Berkshire Hathaway, under the guidance of Warren Buffett, is the largest shareholder of Sirius XM. Buffett, a man known for his pragmatic approach to investment, may not actively listen to satellite radio, but he maintains a long-standing relationship with John Malone, a media mogul of considerable influence. Malone, it is said, once described Buffett as the most brilliant businessman he has ever met.

When Malone acquired a controlling stake in Sirius XM, Berkshire Hathaway began adding Malone’s tracking shares to its portfolio. When those tracking shares were converted into common stock, Berkshire Hathaway became the radio operator’s largest shareholder. The position has been added to in recent years, currently owning 37.1% of Sirius XM.

Buffett’s recent retirement is irrelevant. Sirius XM possesses many of the characteristics that drive Berkshire Hathaway’s investment approach – undervalued properties, consistent cash flow, a degree of market dominance. The continued investment, even amidst a general market sell-off, is a validation of sorts – or, perhaps, a testament to the enduring power of inertia.

5. The Illusion of Value

While the market fluctuates, Sirius XM remains stubbornly resistant. Interest rates are declining, while its yield is inching higher. In a rising market, the stock is declining, making its valuation increasingly compelling. A paradox, perhaps, but a predictable one.

Sirius XM is currently trading at a forward P/E of just 6.5. A cheap multiple in any environment, but particularly attractive given the expectation of modest revenue and earnings growth in 2026. The company requires a healthy economy and growing new auto sales to thrive, but even in a state of decline, it is not entirely without merit. It is, after all, still functioning. Still transmitting. Still waiting.

Read More

2026-01-28 22:22