It is a day that many investors have waited a long time for. Sirius XM (NASDAQ:SIRI) at $3.00 during normal market hours. Well, that has happened and it likely has many long time participants in a celebratory mood. The biggest question is whether or not the equity can hold this level.
There are a few dynamics that could make $3.00 a new baseline for the equity, and of course a few that could make it more of a challenge. Early this week I outlined what could be a 1-2-3 punch for Sirius XM. Among the reasons that this equity can make a bullish run are the imminent release of Sirius XM Personalized Radio, positive feedback from analysts on the royalty decision, the potential issuance of 2013 guidance, short interest, and a subscriber announcement in early January that hits 2 million for the year.
There is now another factor to add to the dynamic. It appears that December auto sales will be the second biggest month of the year and that the auto sector has a decent shot at hitting 2012 sales of 14.5 million. December auto sales results will hit the news wires in the first few days of January.
The down side on whether or not Sirius XM can maintain $3.00 has more to do with the macro-economic situation this country faces at the moment. There are many possible strategies, a fiscal cliff, and the consideration of whether or not it is better to take a capital gain now at a lower tax rate or to let it ride. These are all weights on any equity and the answer to these issues differ from investor to investor.
Essentially, Sirius XM is conducting its business in a very straight forward and profitable manner. While no company is perfect, Sirius XM seems to be a gem in a marketplace that can be quite wishy-washy. One key element is keeping street expectations real. There are some $4.00 price targets on Sirius XM. Those are attainable in 2013 and seem grounded in a semblance of reality. It is still to early to set the expectation bar at $5 though. The company has a satellite to launch, a new deal with GM (Fall 2013) that will impact some numbers to the downside in the short term but be beneficial long term, and the dynamic of Liberty Media (NASDAQ:LMCA) which while positive needs clarity.
Personally, I think $3.00 may hold for a brief spell, but we will likely see it below that level again at some point in the nearer term to set up a bigger run after that.
Disclosure: I am long SIRI, LMCA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.