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Investors have literally been on the edge of their seats waiting to see what the new short interest was going to be for Sirius XM (NASDAQ:SIRI). Last month, the shares sold short were 329,897,851, the highest in over 12 months. This number combined with extremely low volume led many analysts to issue Short Squeeze warnings to the Sirius bears. And they must have actually listened, and covered their positions, because the new short interest number was just released and it is down significantly from the last report. As a matter of fact it is down over 70 million shares in just two weeks:

Settlement DateShort InterestAvg Daily Share VolumeDays To Cover
8/15/2012259,752,029105,444,8812.463392
7/31/2012329,897,85138,065,6618.666547
7/13/2012304,461,31043,694,6596.967930
6/29/2012289,951,16833,488,4258.658250
6/15/2012298,260,69728,277,09010.547786
5/31/2012306,525,78059,829,2255.123345
5/15/2012294,106,22387,262,6643.370356
4/30/2012271,252,40742,569,2386.372029
4/13/2012285,024,74767,168,9644.243399
3/30/2012287,587,03540,523,8177.096741
3/15/2012307,802,18447,153,0566.527725
2/29/2012285,847,82856,846,3165.028432
2/15/2012273,099,53757,381,5514.759361
1/31/2012304,862,97063,744,1204.782605
1/13/2012305,095,27767,336,4104.530911
12/30/2011301,375,85425,064,72012.023907
12/15/2011299,035,69143,216,0946.919545
11/30/2011294,696,97769,921,0864.214708
11/15/2011263,937,18268,098,8873.875793
10/31/2011276,976,04152,215,7645.304453
10/14/2011252,299,68076,654,2103.291400
9/30/2011265,825,85385,303,1043.116251
9/15/2011270,521,61764,369,5834.202631
8/31/2011266,898,620103,851,5192.570002
8/15/2011261,844,890124,545,3952.102405

This is the second lowest reading since last October, as you can see from the chart. One thing to consider is that the days to cover for the latest number just released of 2.46 is extremely skewed. It shows average volume at 105 million shares traded each day based on extremely high volume following an exceptional earnings announcement on August 7.

The shares may not get the same kind of Super Short Squeeze boost in the near future that they got in the last couple of weeks. As most of you know, the stock jumped from a low of $2.10 three trading days before the earnings were announced, to a new 52-week high of $2.64 in just under two weeks. This rise was caused by the fact that (1) the earnings call was superb, (2) Liberty Media (NASDAQ:LMCA) was buying on the open market, and (3) as most everyone predicted, the shorts were covering their positions.

DateOpenHighLowCloseVolumeAdj Close*
Aug 242.482.552.472.5447,136,7002.54
Aug 232.542.542.482.5046,517,4002.50
Aug 222.562.582.552.5622,901,7002.56
Aug 212.602.622.562.5736,447,1002.57
Aug 202.602.642.562.5668,008,6002.56
Aug 172.602.602.552.5635,617,3002.56
Aug 162.552.602.512.5985,830,6002.59
Aug 152.562.572.482.5581,646,5002.55
Aug 142.522.542.472.5383,388,9002.53
Aug 132.492.522.482.5175,452,0002.51
Aug 102.382.492.372.48137,504,7002.48
Aug 92.492.492.332.40121,543,6002.40
Aug 82.282.512.282.48325,124,5002.48
Aug 72.252.342.222.30191,370,9002.30
Aug 62.172.232.172.2067,401,8002.20
Aug 32.132.172.122.1631,099,8002.16
Aug 22.142.162.102.1131,450,4002.11

As you can see from the chart, the volume following the conference call was excessive. On August 8, it was over 325 million shares. So what we do not know is how much of the current short interest is from new positions since the stock shot up? There was a lot of chatter on the financial sites about shorting it when it passed the previous 52-week high of $2.41.

Many shorts got a breather from the recent market-wide correction in the last few days. Sirius fell briefly to $2.47, but the shares were gobbled up before most investors could get bids in. This drop had been expected due to world-wide recession rumors, among other things. And this little dip may linger until there is some type of concrete news released regarding the Liberty takeover.Chart forSIRIUS XM Radio Inc.

Until then, investors must rely on their gut instincts, and the fact that Sirius has so much going for it. As you can see from the chart above, even though the stock has taken a little breather, it is still way above the other market indexes. Sirius longs must accept that when the chart looks like this, there is going to be some profit taking. But, according to Yahoo Finance, analysts estimate that the next two quarters will bring even more exceptional results compared to last year. The earnings per share is expected to jump up 50%, from two cents a share to three for Q3. And Q4 EPS is expected to double from one cent a share to two cents. I have every reason to think that these results are not only doable, but may actually be a little low. I think the higher estimates are more in line with the current sub growth, which I expect to hit 2 million net additions for 2012.

Earnings EstCurrent Qtr.
Sep 12
Next Qtr.
Dec 12
Current Year
Dec 12
Next Year
Dec 13
Avg. Estimate0.030.020.550.10
No. of Analysts12.0012.0010.0011.00
Low Estimate0.020.020.530.06
High Estimate0.030.030.560.14
Year Ago EPS0.020.010.070.55

The same analysts at Yahoo have also issued the following price targets for Sirius, which I think are also too low. Consider that the shares were within 16 cents of $2.80 a few days ago. I think these numbers will be upgraded soon:

Mean Target:2.80
Median Target:2.80
High Target:3.35
Low Target:2.25
No. of Brokers:13

Most professionals consider a correction to be between 5% and 20%. Anything beyond that is considered to be the beginning of a Bear Market. This means that Sirius stock can fall anywhere from $2.50 to $2.11 and still be considered a correction. Since it broke through the $2.50 to $2.47, and bounced back up, the correction may be over. Because the idea that it would fall to $2.11 erasing all of these recent gains seems like an impossibility right now. This appears to be a golden opportunity to add to your position if you are currently long. If you are new to Sirius, and still not convinced, Seeking Alpha author Qineqt has written an excellent article citing numerous reasons why you should buy the stock right now.

We have to remember the uncertainty involved in the Liberty/Sirius Saga, but the performance of the company seems to be forging ahead, undaunted by all the drama and speculation. Keep in mind that old saying that "no news is good news." I think if Sirius CEO Mel Karmazin had been violently opposed to the new Liberty De Jure control application filed with the FCC a week ago, he would have made it known by now. Obviously that is pure speculation on my part. But a lot of investors seem to agree, since they are continuing to hold their positions, and the stock seems primed for another rally.

Disclosure: I am long SIRI. 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.

Source: Sirius XM: Short Interest Plunges 70 Million Shares In Two Weeks