Sirius XM (NASDAQ:SIRI) shares are soaring today as investors react to Janco Partners' upgrade of the stock from accumulate to Buy with a price target of $2.50; raised from $2.15. This news caught me off guard because my spreadsheet told me that Janco already had a "buy rating" on the stock since Febreuary 15th. So I am questioning whether this should be reported as an upgrade by The Fly on the Wall or simply a reiteration of a previous rating. But nevertheless, the stock has reacted favorably on the news.
On June 12th, Seeking Alpha contributor James Emerson wrote an article that suggested that Sirius might not hold a price of $1.93 and everyone laughed. The very next day the stock hit $1.86; its lowest level in almost two months. While James wrote his price theory strictly from a technical standpoint, suggesting that the stock might hit $1, (something I disagreed with) his underlying premise was correct, Sirius does not trade on fundamentals; this fact cannot be debated. I say this even though I am now long the stock; though conventional wisdom continues to tell me that I should be.
The fact of the matter is that the stock is poised for a breakout. I have been saying for quite some time now that Sirius is a trader's paradise. Since last Friday the stock has had a swing of 27 cents on seemingly no news of any significance. It is clear that a trading range has now been established, which makes me now more comfortable taking a long position in the stock, even though uncertainty remains. If it shocks you that I have "long" in quotes it's because I won't hesitate to take a profit and go in the other direction if the valuation dictates it. I think it is safe to now say that the stock has sufficiently consolidated from the exuberance that triggered its recent highs post earnings.
My contention at the time was that when a stock such as Sirius begins to trade off of fundamentals, it is often a cause for concern. I mentioned that the stock needed a period of consolidation from the highs of $2.44 and I took a lot of abuse for that opinion. The rational progression was clear to everyone who had read the "story" before. This was not a case of the "market waking up" to Sirius, but another opportunity to capitalize on both the popularity and volatility of the stock; particularly with the high retail ownership that it has. But at these levels and knowing what we already know as it relates to its recent high of $2.44, there is a great chance for a quick 30% profit in the stock over the course of the next several weeks.
Sirius recently announced that it will offer listeners an uncensored platform to say whatever they want. The show will invite listeners to be featured live on SiriusXM's Raw Dog Comedy channel, where the mission is to entertain or be hung up on. This may be the perfect opportunity for stockholders to sound off to Sirius' management. Regardless, it should be a very entertaining show.
Sirius remains a great story; one which I often find it very challenging to identify its genre. It is a "feel good story" at times and there are instances where it identifies more with a "romantic comedy." It is no secret that it has many fans. But as everything in life, when one ignores what truly matters in favor of what "feels good" it often ends in "tragedy." But one thing is for certain, the "story" is far from over.
Disclosure: I am long SIRI.