Sirius XM Holdings (SIRI 3.89%) has had a rough time of late, falling nearly 60% in value over the past 12 months. Yet, one of the most famous investors in history has been a keen buyer of the satellite and online radio company's shares. Berkshire Hathaway, led by Warren Buffett, now holds a stake worth several billion dollars.

On many levels, the company's valuation appears blatantly cheap. But from another perspective, shares are cheap for a reason. What exactly is going on? Should you also be adding Sirius XM stock to your portfolio in 2025? There are some issues that investors will want to understand first.

Why Sirius XM stock has struggled

First, the company is struggling to grow its subscriber base. It is this figure that perhaps most influences its revenue growth trajectory. Last year, Sirius XM lost around 2% of its subscribers through the first three quarters. That explains the flattening revenue curve in the chart below.

The cause of this decline is multifold, but competition is the gorilla in the room. With seemingly countless numbers of music and radio streaming options, the allure of Sirius XM's offerings isn't nearly as attractive as in years past. With near total connectivity and 5G networks delivering instant downloads, people can choose any type of content at any time, often for free.

Second, flattening revenue growth has caused the stock's price-to-sales multiple to gradually erode, from 5.5 times sales in 2015 to just 3 times sales in 2022. Right now, shares trade at just 1 times sales. Falling revenue, combined with a huge decline in price-to-sales multiple, has resulted in a dramatically lower stock price over the last few years, with the effects magnified over the trailing 12 months.

But before you give up on Sirius XM, you should know that one famous investor -- perhaps the most famous investor of our time -- seems to be betting on a turnaround.

SIRI data by YCharts.

Warren Buffett is a fan of this turnaround story

Top-line results from Sirius XM don't look good. But it seems as if Warren Buffett interprets another story unfolding. His holding company owned shares in 2023, when the stock was priced at roughly $40 per share. According to recent filings, that stake has grown steadily over time and is now worth around $2.4 billion. That's 30% of Sirius XM's total market capitalization.

What do Buffett and company see in Sirius XM shares? It's likely a classic value play. While revenue is declining, the company is still generating plenty of free cash flow. With the exception of last quarter, the company is also still profitable. On a forward basis, shares trade at just 7 times 2025 expected earnings. Shares also trade just below 10 times free cash flow, suggesting a free cash flow yield of more than 10%.

Over the past decade, Sirius XM management has directed this excess money into share buybacks and a growing dividend, which now yields around 5% following the share price decline. With those share purchases now well above the current stock price, so far, they've proven to be a giant waste of shareholder capital. Yet with Buffett's involvement, I'm expecting the company's asset allocation to improve. And with the exception of the most recent quarter, Sirius XM should have plenty of capital to either reinvent itself, or turn into a cash flow distribution machine.

I'm not sold on the company's future. There's simply too much competition for my liking. As a recent Morningstar report concluded, "Sirius XM is fighting an uphill battle as the technology that once gave it a unique offering and an advantage over competition is no longer a necessity to offer a subscription service in vehicles." But Buffett and company clearly have a different vision. So while I'm not jumping in today, investors who want to follow in Buffett's footsteps should take a closer look.