Those holding Sirius XM (SIRI) need to put on their jackets and helmets because the flak is going to be coming in thick in the near term. Regardless of the long term prospects of satellite radio as an industry the moving averages are currently forecasting near term weakness in the shares.
After passing through the 100DMA in late May, the lack of a recovery in SIRI has the 50DMA on a crash course headed directly towards the 200DMA. While this type of cross is not a 100% signal, there is usually weakness in the near term as longs exit in anticipation of this negative technical catalyst.
With the current steep angle of descent and a slightly rising 200DMA we should be seeing the cross within the next week.
It's Not All Bad
As bad a death cross sounds there are actually some encouraging signs in some of the other technical indicators. We have a bullish divergence in the RSI as well as strength in the MACD with the histogram staying in positive territory through the recent sideways to down movement.
The short interest is relatively low at 8.3% so the potential for a significant short squeeze is rather limited. With a 5 year PEG ratio at 1.10 we are near "fair value" for the shares for that metric and any weakness after the cross should be a buying opportunity. While the debt to equity ratio is a bit alarming at 348 we are finally seeing consistent profitability coming from the company which allows that ratio to be reduced over time.
With a near term negative technical catalyst but longer term positive growth trends, I believe that anyone that can weather the coming storm should be able to profit nicely.
What would it take for me to become a Subscriber?
I'm not a Sirius customer. While it is a service that I greatly enjoy whenever I run into it free with a car rental, I remain one of those failed converts that litter the SIRI marketplace.
More than likely it would require smart phone integration. I already have enough electronic devices so a portable SIRI radio does not interest me in the slightest. I do not spend enough time in my car to justify the additional expense and aside from Howard Stern there is little exclusive content that I feel I am missing out on.
The fact that SIRI does offer online listening is encouraging but as they have no significant smart phone presence, as far as I can tell, I remain unconverted. If the company sees the future involving separate SIRI radios, they are grossly mistaken. They are a great service and should be looking to expand the platforms that the service is offered on.
If they can figure out a way to compete directly on the smartphone platform they will be able to go a long way to combat their current fledgling competition found in Spotify and Pandora (P). While SIRI currently offers a good service, this sort of change in direction would be required for me to be really interested in SIRI for the longer term.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIRI over the next 72 hours.