The satellite radio operator hasn’t worked out well in recent years for its shareholders.
Sirius XM (SIRI -0.83%) has gotten a lot of attention because a famous investor is on board. Warren Buffett-led Berkshire Hathaway owns 37.1% of the outstanding shares. This can prompt individual investors to wonder if there’s a buying opportunity here.
But this media stock has made for a terrible investment. Had you bought shares five years ago, you’d have lost 54% of your starting capital (as of Aug. 15). That’s an extremely disappointing track record.
Should investors forget about Sirius XM? That might be the right move, as there’s another stock that has made far more millionaires.
Image source: Getty Images.
Sirius XM’s struggles continue
It’s not too difficult to figure out why Buffett and Berkshire have such a huge position in Sirius XM.
For starters, Sirius XM is profitable. It generated $409 million in net income through the first six months of 2025. And the management team expects to produce more than $1.1 billion in free cash flow for the full year, a figure that it believes will rise to $1.5 billion in 2027 thanks to capital expenditure reductions.
This cash allows the business to pay a hefty dividend yield of 4.69%. That sort of income stream can get certain investors excited.
Another positive trait is that Sirius XM makes 76% of its revenue from subscriptions, with 20% coming from advertising. Subscriptions introduce a predictable and recurring revenue stream.
One obvious issue, though, is that Sirius XM is struggling to grow. Sales decreased 2% year over year in the most recent quarter. And Wall Street consensus analyst estimates call for the top line to decrease 2% between 2024 and 2027. Intense competition in the internet and mobile age from popular streaming platforms from Apple, Spotify, and Alphabet‘s YouTube have made things extremely difficult for Sirius XM.
Investors are better off forgetting about Sirius XM. That’s true even though shares trade at a cheap forward price-to-earnings ratio of 7.8.
A winning stock with a bright future
Instead, it’s a smart idea to take a closer look at Amazon (AMZN 0.25%). Since its initial public offering in 1997, this “Magnificent Seven” stock has seen its share price skyrocket 235,900%. Even though the business carries a massive market cap of $2.5 trillion and raked in $168 billion in Q2 sales, it remains a solid investment opportunity today.
One reason why is because Amazon should register durable growth, even from its current size. Everyone knows the company as the leader in online shopping, having disrupted the entire retail landscape with its low prices, vast selection, and fast and free shipping. E-commerce still has lots of room to take share from brick-and-mortar retailers.
However, Amazon also benefits from other secular tailwinds. During the most recent quarter, the company reported $15.7 billion in digital advertising sales, representing 23% year-over-year revenue growth. Grand View Research estimates the worldwide digital ad industry will grow at 15% per year throughout the decade.
And Amazon has a strong position in cloud computing, with its Amazon Web Services (AWS) platform. CEO Andy Jassy says that greater than 85% of worldwide IT spending remains on-site, presenting a tremendous opportunity in the long run for money to move to the cloud.
This segment also makes Amazon a leader in the artificial intelligence (AI) race. Investors can view this company as an infrastructure play in the industry. Other businesses come to AWS to develop their own AI applications. That’s possible because AWS has a long list of AI services available. This positions Amazon well in an AI future.
Had you invested just $425 in Amazon shares in 1997, you’d have $1 million today. That kind of return won’t happen again, but this is a business you want in your portfolio over Sirius XM.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Spotify Technology. The Motley Fool has a disclosure policy.
