With Sirius and XM at long term lows, the natural question is, "where is the bottom?"
The answer to that question can take many forms, but something we need to consider is how it is that we got to where we are now.
1. The merger process has taken quite a long time, and the uncertainty associated with the long wait has caused the equities to suffer, and the confidence of investors to erode.
2. The Wienkes analysis (Goldman Sachs) set a low target for Sirius and XM, and the street reacted by selling off in a substantial manner.
Wienkes carries a "Convicted Sell" on Sirius, This is the lowest rating that is offered by the firm. When Wienkes issued his note, he set a $1.00 price target on Sirius as a stand alone company, and a $1.75 target as a merged company.
Most seem to feel that the merger will pass through the FCC process, so what we are dealing with is the $1.75 price target. Sirius is very close to that target right now. So close in fact that we should hear from Wienkes soon. The question is what his opinion will be.
If he wants to keep a "Convicted Sell" on Sirius, then he will have to lower his price target. This puts him in a position of establishing a merged company price target that is getting quite close to his stand alone target. Most people believe that the merger will deliver synergies, and even Wienkes himself sees synergies. This fact, in my opinion, would limit the level to which Wienkes can maintain a "Convicted Sell". If he were to maintain that rating, any price target under $1.50 would likely begin to be questioned by the street.
Thus, one possible bottom is $1.50 in my opinion.
The other choice that Wienkes has is to "Upgrade" Sirius to a "Sell" rating. Yes, that would actually be an upgrade from Wienkes. He could establish a lower target with such an upgrade, but at that point the "conviction" of his sell rating would lose some of its power.
Whether people believe it or not, it is clear that Wienkes has the ear of the street. Whether his opinion is truly believed, or simply used by the bears to drive the price down can be debated, but at this point that debate is almost immaterial. This is because it seems likely, and perhaps even logical that these stocks are near their bottoms.
Now, before people run around thinking that the bottom is in, I would offer a few cautions. Until the merger decision is rendered, there is limited movement in these equities no matter what Wienkes opinion is. Additionally, these equities seem to be trading on emotion. Certainly there is no guidance yet, and until there is guidance, assumptions can and will be made.
Thus, while we may get an answer to the Wienkes saga, there is still a big factor in that a merger decision has not yet been reached.
If we have seen one thing in SDARS, it is that swings are possible with these stocks. Good news tends to drive things higher than it should, and bad news drives the prices lower than it should. Investors are at a point of deciding what speculation and assumptions to follow, and goals need to be established for short or long term. Investors strategies need to consider both aspects. There are investors who are in for a long term, and investors that are playing the merger on a short term basis.
What to do???
Watch the sector closely. Watch the merger process. Watch the volume. Establish your goals, and try to understand the volatility that short term traders (buyers and sellers) will bring to these equities.
At this point try to consider WWWD (What Will Wienkes Do) and WWFCCD (What Will The FCC Do).
Position - Long Sirius, Long XM