1 Warren Buffett stock that could go parabolic in 2025 and beyond

There's one laggard in the Berkshire Hathaway portfolio that can turn things around this year. Bonus: It also happens to come with a 4.7% yield.

| More on:
A little girl with red hair runs excitedly with a rocket strapped to her back, trying to launch.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

If you're looking for one of Warren Buffett's biggest gainers of this year, you may want to start with one of his worst performers in 2024. Sirius XM Holdings (NASDAQ: SIRI) was a painful stock to own last year. Shares of the satellite radio provider plummeted 58% in 2023.

Sirius XM is one of the roughly three dozen publicly traded companies owned by Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). It accounts for a little less than 1% of the value of that widely followed portfolio, but Buffett seems to disagree with the yearlong sell-off. Berkshire Hathaway added to its position in October. It purchased nearly 5 million more shares last month.

Is it time to follow Buffett's lead, warming up to a media bellwether that began last year as a large cap but got marked down to a mid-cap? Let's take a closer look at what went wrong for Sirius XM, then check out the things that can go right for one of Berkshire Hathaway's latest cravings.

Turning down the volume

It's easy to see why speculators have moved on from the investment that was a meme stock before meme stocks were a thing. It was a popular penny stock with seismic growth potential ages ago. A reverse stock split in September -- which facilitated the transaction to absorb complicated tracking shares that Buffett also used to own -- fished the share price out of the single-digit betting pool.

Growth investors have also set up camp elsewhere. Sirius XM is now entering what should be its third consecutive year of declining revenue. The shares were running on fumes for a long time before this unfortunate streak. You have to go all the way back to 2014 to find the last year that Sirius XM came through with organic double-digit revenue growth.

At least some of the downticks of 2024 are justified. The number of premium subscribers to the flagship satellite radio service peaked in 2019. The platform was starting to stage a recovery coming out of the pandemic, but that bullish trend ran out of gas in 2023. A modest 0.6% decline in revenue two years ago should widen to a roughly 3% slide by the time 2024 numbers become official.

The stock took one final hit last month when it issued disappointing guidance for 2025. Sirius XM is now bracing investors for a 2% top-line decline for all of this year. This was after the radio broadcaster revised its 2024 outlook lower on Halloween. Can 2025 can turn last year's black cat into catalysts?

Playing a new tune

The exit of speculators and growth investors should open the door for value and income investors. This is a scalable model that is vulnerable to the impact of contracting revenue, but Sirius XM is still generating a lot of free cash flow and positive earnings even as it struggles.

Sirius XM still expects to deliver $1.15 billion in free cash flow in 2025, along with $2.6 billion in adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA). This is a slight step back from last year on both fronts, but Sirius XM shares are now trading for just 7.6 times forward earnings.

The platform, with 33.2 million subscribers, is doing some encouraging things with its excess cash. It's been buying back stock, reducing its once-massive outstanding share count by 42% over the past dozen years. It's also shelling out a substantial dividend that has become even more generous after eight years of hikes and the free-falling stock price. The stock is now yielding around 4.7%, more than the market's highest-yielding money market funds, which have retreated on their payouts in recent months.

Sirius XM's business hasn't faded as quickly as the stock over the past year. Berkshire Hathaway likely sees the value in today's lower price, but don't be surprised if Sirius XM is lacing its shoes to race again.

Satellite radio is consumed largely in vehicles, and there are strong catalysts for folks getting in their cars again. U.S. retail gas prices have fallen substantially since springtime of last year. Companies are calling employees back to in-office work. Lending rates haven't fallen as sharply as many had hoped, but when that does happen, it should trigger a surge in auto loan demand from folks looking to refresh their cars.

A cheap stock with a hefty quarterly dividend and bullish catalysts hiding in plain sight? Don't be surprised if one of Buffett's biggest losers in 2024 leads Berkshire Hathaway's stock portfolio higher in 2025.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Should you invest $1,000 in CSL right now?

Before you buy CSL shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and CSL wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Rick Munarriz has positions in Sirius XM. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

This Artificial Intelligence (AI) chipmaker just got a game-changing boost from Amazon, and Nvidia investors should be paying close attention

Amazon just made a notable investment in Nvidia's top rival.

Read more »

Happy man working on his laptop.
International Stock News

A once-in-a-decade opportunity: Here's why I'm buying Alphabet stock like there's no tomorrow

Alphabet's stock rarely gets this cheap, and right now could be a once-in-a-decade opportunity to scoop up shares at a…

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
International Stock News

Is Warren Buffett's Berkshire Hathaway the smartest investment you can make today?

So, with all the uncertainty, is Berkshire Hathaway the smartest investment you can make today?

Read more »

Warren Buffet
International Stock News

7 ways Warren Buffett changed my investing approach

I'm a big fan of Warren Buffett, and have been for many years.

Read more »

iPhone with the logo and the word Google spelt multiple times in the background.
International Stock News

Down 12% this year, should you buy Alphabet stock?

The Google owner is underperforming the Nasdaq Composite, which has rallied in recent weeks.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
International Stock News

Missed out on Apple in 2012? Buying Nvidia stock today could be your second chance

By now, it's clear that artificial intelligence (AI) is the next major technology platform.

Read more »

Robot humanoid using artificial intelligence on a laptop.
International Stock News

3 reasons Amazon stock looks like an incredible bargain right now

Here are three reasons Amazon stock looks like a rare bargain at current levels.

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
International Stock News

Warren Buffett's $347 billion warning to Wall Street is ringing out loud and clear. History says this happens next.

Let's take a look.

Read more »