Sirius XM Holdings: Buy, Sell, or Hold?

Satellite radio veteran Sirius XM Holdings (NASDAQ: SIRI) broke out of a long standstill in 2023, but not in a good way. After trading sideways for two and a half years, Sirius' stock chart started to buckle. The trading pattern turned volatile last year, falling as much as 41% with a peak gain of 34%, before ending the year just 6% lower.

The bears are winning the Sirius battle in 2024. The stock is down by 33% year-to-date, and that's after climbing out of the 54% hole it visited in June. What's driving these wild swings, and how should investors approach Sirius XM stock today?

Sirius by the numbers

First, let's crunch some financial data. Sirius XM's price-to-earnings (P/E) ratio stands at a relatively modest 10.9. The stock looks affordable compared to its historical averages, and certainly in the context of modern media services. For example, Netflix (NASDAQ: NFLX) sports a P/E ratio of 45.2 and Spotify (NYSE: SPOT) is exploring all-time highs with a $59 billion market cap despite negative earnings.

With a market cap of $14.0 billion, Sirius XM holds a solid position in the mid-cap arena. Moreover, the company boasts a generous dividend yield of 2.9%, which is music to any income-focused investor's ears.

On the other hand, Sirius XM's revenue growth has stalled out and its free cash flows are shrinking. Those negative trends are bad news for Sirius XM and its investors, and they make sense when you consider the rising tide of digital content providers. Sirius XM's satellite radio service still works, but the company is also becoming just another face in the digital media crowd.

Pandora's positive notes

On the brighter side, Sirius XM's Pandora subsidiary is singing a happier tune with a 7% year-over-year revenue growth in the first quarter. Subscriber counts held steady but Pandora notched stronger sales of its advertising space. This indicates some ad-based strength in the streaming segment, even as competition heats up.

In broader terms, Pandora's stronger ad sales indicate an end to the inflation-driven downturn in the digital advertising sector . In other words, it's also good news for online media specialists like Spotify and Netflix. Hold that thought for a minute.

Buffett's bet

Here's a juicy tidbit: Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) scooped up millions of Sirius XM shares last year . If the Oracle of Omaha sees something, it's worth a closer look. However, it's also worth noting that Berkshire trimmed its Sirius XM position by 8.9% in the first quarter of 2024.

The legendary investor certainly isn't cashing in profits on that Sirus XM position. Perhaps his patience is wearing thin with the company's halted growth?

Should you buy, sell, or hold Sirius XM stock?

Given these mixed signals, Sirius XM appears to be in a holding pattern. The stock is cheap and offers a decent dividend, but growth prospects seem uncertain amid rising competition and flat revenues. And Warren Buffett's active interest raises many eyebrows on Wall Street, but so does his gradual exit from Berkshire's Sirius XM position.

Current shareholders should think twice before locking in losses at today's modest stock price, but I'm also not convinced that the stock will move much higher in the long run. Sirius XM looks like an outdated business idea nowadays, given the wide availability of internet-based music and podcast content .

All things considered, I'd call Sirius XM a robust "hold" for now, with an eye toward taking profits and walking away if the stock rises much higher. A P/E ratio near the 5-year average of 21.5 should make you reach for the "sell" button -- and maybe you should reassign that cash a bit quicker. Looking back at the bullish signs in the digital advertising market, I'd much rather own Spotify or Netflix as that sector recovery plays out.

Anders Bylund has positions in Netflix. The Motley Fool has positions in and recommends Berkshire Hathaway, Netflix, and Spotify Technology. The Motley Fool has a disclosure policy .