Sirius XM: $3.59 And Rocking - Time To Run?

| About: Sirius XM (SIRI)

I have been beating the Sirius XM (NASDAQ:SIRI) at $3.50 drum since it made its sharp move after Q1 earnings were released. As I said before the conference call, investors should watch for three pieces of news:

  1. News of buybacks to have begun.
  2. News of a permanent CEO.
  3. Increased subscriber guidance.

Two out of three isn't bad, and with the news that over 200 million shares had already been repurchased, and news that James Meyer was now in a permanent position as CEO, it seems No. 3 didn't matter as much. The fact of the matter is the company posted acceptable results as far as performance, and little quarterly fluctuations in things like ARPU and churn, which can be impacted by such simple things as an extra day in February due to leap year are not major concerns to worry investors.

What's happening here is that Sirius XM is on the hunt for shares, and is returning billions to shareholders in the form of share buybacks. Shrink the float, and every single outstanding share now owns "more" of the company on a percentage basis. So long as market cap stays steady or increases, then the share price should appreciate at a considerable pace.

So what to do now that that $3.50 target has been hit? Where's the upside? And most importantly, has this now become a long-term sell?

Click to enlarge image.

I think the answer here is quite simple as far as long-term holders go. Stay the course, folks. This really doesn't change my long-term target or opinion. I still see $4.25 as reasonable by the end of the year, and I think long-term holders would do themselves a disservice to sell out before the buyback is nearing completion. That means holding at what is, as I write this, a $3.59 share price.

If you need to sell soon, where is the short-term upside? I would not be surprised to see the stock run to $3.75 in the coming weeks, especially given current momentum. Those who need to sell in the near term may find $3.59 acceptable, or you may want to hold out just a little bit longer. That said, take care not to get too greedy. I always like to leave a few pennies for the other guy.

Traders? I'm not sure what to tell you. Looking for a gap fill back at $2.90 didn't work. Looking for a retest of $3.25 has not worked. And I am not so sure it will be that easy to predict and time the short-term movements of Sirius XM with this buyback in place providing support.

As far as shorts go, there are folks like Seeking Alpha user Sirishortseller who said on Dec. 17, 2012:

Now I'm busy establishing new short positions at a 4 year high mark for the stock

Well, I hope he (or she) and others covered. That was 70 cents ago. Ouch. This really is the wrong stock to be establishing a short position on, and I would caution others to continue covering and look elsewhere for potential short candidates if you can find many in this market.

Sirius XM investors have a lot to be excited about lately, and those who have continued to hold have been rewarded for their patience. Stay the course -- I think there's more ahead.

Disclosure: I am long SIRI. I am long SIRI January 2014 $2 and $2.50 calls. 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.