Sirius XM Short Interest Is Down

| About: Sirius XM (SIRI)

It appears the "shorts" are realizing that it doesn't matter what Liberty Media (NASDAQ:LMCA) does with regard to buying Sirius XM (NASDAQ:SIRI) -- the stock is not going to crash to $1.50 like some of them had hoped. As of June 29, 2012, Sirius short interest is 289,951,168 shares, down almost 3% from 298,260,697 on June 15. Based on the new current average daily share volume of 33,488,435, this would take 8.65 days to cover, according to Compare this to Apple (NASDAQ:AAPL), which has only 12,445,119 shares sold short. With an average daily volume of 12,150,233, it would only take one day to cover Apple's short shares. And Liberty has 1,208,817 shares that have been shorted, which would take 1.69 days to cover.

Chart forSIRIUS XM Radio Inc.

Both Sirius and Liberty have been traveling in tandem for the last several years. And although both have outperformed the market in general, Sirius continues to stay a bit ahead of Liberty. Many Sirius XM investors feel that the shares did not get a big bump from the huge rise in Q2 subs, which were up 38% over last year. However, the announcement came on Monday morning, when the rest of the market was down:

Chart forSIRIUS XM Radio Inc.

The market has stayed down for the past five days -- especially the Nasdaq (in red on the chart), which started out down again this morning. As I noted in another article, the news about 622,000 net new subs for the quarter probably started leaking out when the quarter ended. This would account for the price jumping from $1.85, the week before the announcement, to $2.12 after the news officially broke. Some readers thought that I meant that the company had leaked the news on purpose. I do not think that for a minute, and as I said to one reader, this would be like trying to hide a 1,000-pound gorilla. This is huge; it is historical. As the market recovers from its Fed/euro/summer gloom and doom, Sirius will start back up again. This is because this large increase in subs will have a dramatic effect on revenue. According to Yahoo Finance, the current outlook is as follows:

Revenue Est. Current Qtr.
June 12
Next Qtr.
Sept. 12
Current Year
Dec. 12
Next Year
Dec. 13
Avg. Estimate 830.03M 850.58M 3.37B 3.75B
No. of Analysts 12 11 14 12
Low Estimate 816.93M 828.64M 3.30B 3.57B
High Estimate 839.00M 866.00M 3.42B 3.96B
Year Ago Sales 747.34M 762.55M 3.01B 3.37B

Now Sirius XM CEO Mel Karmazin has upped the revenue guidance to $3.4 billion based on Q2 results. As you can see here, some analysts were already predicting $3.42 billion before they found out about the new sub numbers. So I expect to see some of these same analysts upgrading these revenue numbers by about $80 million to a high of $3.5 billion. That's because with higher sub numbers, there will also be more radios sold this year.

As I wrote in the article mentioned above, I think the number of subs will come in at 2 million for the year. Karmazin thinks that number will be closer to 1.6 million. Considering that the total subs for 2011 were 1.7 million, that would be a decrease. It is hard to prove a decrease in subs when the past quarter had a 38% increase. Perhaps he is budgeting for 400,000 listeners to dump their subs when Liberty takes over. While there are some subscribers who would do that, the number should be insignificant.

Disclosure: I am long SIRI. I will continue to buy SIRI on the dips.