Sirius XM (SIRI) Tecnical Review – July 31, 2010
Sirius XM has a busy week ahead. The company will be offering up their second quarter conference call on August 4th and the auto sector is expected to announce positive sales figures for the month of July prior to the Sirius XM call. The question on the street is where Sirius XM will come in with their numbers.
What Sirius XM investors need to realize is that an imminent conference call brings about three distinct groups of traders. Those that trade the technicals, those that trade the fundamentals, and those that speculate. In the past, there has typically been a run up going into the call driven by the speculators, and a downward correction driven by those that trade fundamentals. It is not that Sirius XM reports bad numbers, it is just that from a fundamental standpoint there always seems to be some red herring that just doesn’t quite hit the right note.
In many ways Sirius XM is a stock going through growing pains. It is not little anymore and full of potential to do anything, but it has not yet produced enough results to make it a stable player in the minds of everyone. Sirius XM is that draft pick that has a lot of raw talent, but does not have enough professional games under his belt to be awarded the franchise player tag. The company has some very bullish believers as well as some very bearish detractors. Thus the tug-of-war we have seen quarter after quarter.
Going into this conference call Sirius XM saw some wonderful moves up on volume. This was a welcomed relief for many long term investors. Unfortunately it was followed by some anemic volume, thus dampening the excitement a bit. Over the past few trading days we have also seem the Exponential Moving Averages shift from bearish to bullish. Today things look very bullish. Another technical positive was that the company broke through a key resistance point at $1.02. The question here is are these technical indicators less valid because of the entrance of the speculators that seem to arrive ahead of every call? Should investors trust the technicals?
What we know is that Sirius XM is still in the middle of a stubborn trading range between $0.92 and $1.10. We could see some more momentum going into the call, but it will take some great headlines on the auto sector as well as a great call from Sirius XM to get the equity above, and keep it above, $1.10. If this is the quarter without the red herring, the SIRI has a chance to run from a technical as well as fundamental standpoint. If this is the quarter that can thin out the speculator herd (bulls and bears), then the key elements of stability can take more control over the reigns.
From a technical standpoint volume is a moderate positive. EMAs are bullish, and support and resistance looks good because all resistance above current levels is very weak. From a historic standpoint, SIRI may have gotten to a bullish technical situation on pre-conference call speculation. It is a tough call, and merits close attention over the next few days.
Position – Long Sirius XM Radio
Spencer, Over the last 12 months playing the CC has been nothing but wishing on the stars type of sentiment ….Hanging out in chat rooms I heard it all …….The utter disappointment from the SP performance left many traders / longs wondering what the heck just happened the minute mel takes the mic…….So right now, we have a surprisingly 583,000 new subs added and not knowing the method of these hefty additions,This should have analysts scratching their heads…….. The forecast over the next few days looks favorable to speeding up with $1.03 in the books.
Personally I stopped speculating where the SP is headed short term due to the RR …..siri right now is part of the general market and where that goes siri goes.
I wonder whats the chances of a Howard Stern announcement happening this week?
As much as some people like to moan about Sirius share price swings, look at Ford’s share price, an auto company with lots of shares outstanding and lots of debt, but producing solid earnings the last few quarters after narrowly averting bankruptcy about the same time as Sirius did.
It went from a high of $14.57 on April 26 (only a few days before Sirius hit $1.25), all the way down to $9.75 on June 29, and now is back to $12.77. Wider swings than Sirius.
It has nothing to do with the speculator herd, it has everything to do with mm’s keeping the price down. Right now institutions want shares but they want them at cheap prices. Until institutional ownership increases significantly, we will trade in ranges regardless of fundies. .
the MM’s job is to create a market. Can they manipulate things a bit? Yes. Is this pure manipulation? Absolutely not. Sirius Xm is trading at 18X Ebitda. Some are very correct in arguing that the equity is fairly valued in the $1.00 to $1.25 range.
If Institutions really want in, the ownership levels would have already been increasing. This equity has seen the low $0.90’s many times over the past few months.
Sorry, but all of these deep dark conspiracy theories just don’t add up. If the MM’s had the power you say, why havent they taken it down to a level where all of these supposed institutions can jump on. Think about it, and you will see that it is not the MM’s as much as some think.
It’s all about debt for the institutions. As debt continues to restructured and paid down, credit upgrades will follow and institutions will increasingly be become buyers.
It is not about debt. It is about Sirius XM’s ability to manage that debt. A ton of Sirius XM’s debt is held by Liberty. Sirius XM’s bonds (debt) trade at par. The debt picture is fine.
Spencer, Glad to hear that…SXM should be getting credit upgrades soon if the debt picture is “fine”. The sooner SXM gets out of “junk” status the sooner institutions will be committing in a big way to this equity…
Also, Spencer, I agree that SXM is managing its debt well and has it under control; however, institutions when looking at the size of the debt and the uncertain to weak economic recovery, there is little doubt they are hesitant to commit to companies with substantial debt until the economic recovery becomes stronger and more certain…just the way it is…
EBITDA and Free Cash flow are the keys in order to provide confidence to institutions that SXM can continue to manage their large debt effectively. If they beat consensus look for credit upgrades that will provide the needed catalyst for a post CC run similar to last year’s post CC Q2 run with full participation by institutions…