Options expired Friday, the short interest remains high as of June 30th, the company announces a big boost in subscribers, and SIRI remains locked in a tug-of-war between $0.90 and $1.00. Many technical indicators are very bearish right now, but there seems to be enough core bulls in the stock to keep it from dipping too low too fast. Lately it has been a case of one step forward and two steps back.
Such activity frustrates many investors, but the action in Sirius XM keeps traders happy by moving up to 3% during the day. The active traders and the short position seem to have more weight in the tug-of-war match, but how long can it last? The issue at hand seems to be the short term outlook vs. the longer term outlook.
Many feel that huge numbers and growth will come to this company at some point in the future, while others believe that the short term is a place of confusion in the numbers. Some feel that the Q2 numbers will bear out the positives that everyone has been looking for, but the answer is actually somewhere in the middle. Q2 will be a good stepping point in the history of the company, but there will be numbers that the naysayers will like. Between $32 million in costs already known from work on their debt and at least $18 million in additional Subscriber acquisition costs (SAC), the company could report earnings of anywhere from a loss of a penny to positive a penny. More likely than not, they will offer up a break even quarter. The naysayers will point to the fact that they went from a profit last quarter to break even this quarter. The longs will proclaim that the added subs and payment of debt is a good thing. Both are correct, and that is why the equity is in a tug-of-war.
Look for this battle to play out for quite some time with periods where the advantage shifts from one side to the other. Right now most technicals are bearish, but that could change any given time given that the short side trade has pretty much played out for this swing.
What should investors watch for? Volume. Moves on low volume lack conviction and strength. Lately virtually all moves on SIRI have been on lower than average volume. Simply stated, there are a lot of people on the sidelines.
Position - Long Sirius XM Radio