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

Aug.25.12 | About: Sirius XM (SIRI)

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 Date Short Interest Avg Daily Share Volume Days To Cover
8/15/2012 259,752,029 105,444,881 2.463392
7/31/2012 329,897,851 38,065,661 8.666547
7/13/2012 304,461,310 43,694,659 6.967930
6/29/2012 289,951,168 33,488,425 8.658250
6/15/2012 298,260,697 28,277,090 10.547786
5/31/2012 306,525,780 59,829,225 5.123345
5/15/2012 294,106,223 87,262,664 3.370356
4/30/2012 271,252,407 42,569,238 6.372029
4/13/2012 285,024,747 67,168,964 4.243399
3/30/2012 287,587,035 40,523,817 7.096741
3/15/2012 307,802,184 47,153,056 6.527725
2/29/2012 285,847,828 56,846,316 5.028432
2/15/2012 273,099,537 57,381,551 4.759361
1/31/2012 304,862,970 63,744,120 4.782605
1/13/2012 305,095,277 67,336,410 4.530911
12/30/2011 301,375,854 25,064,720 12.023907
12/15/2011 299,035,691 43,216,094 6.919545
11/30/2011 294,696,977 69,921,086 4.214708
11/15/2011 263,937,182 68,098,887 3.875793
10/31/2011 276,976,041 52,215,764 5.304453
10/14/2011 252,299,680 76,654,210 3.291400
9/30/2011 265,825,853 85,303,104 3.116251
9/15/2011 270,521,617 64,369,583 4.202631
8/31/2011 266,898,620 103,851,519 2.570002
8/15/2011 261,844,890 124,545,395 2.102405
Click to enlarge

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.

Date Open High Low Close Volume Adj Close*
Aug 24 2.48 2.55 2.47 2.54 47,136,700 2.54
Aug 23 2.54 2.54 2.48 2.50 46,517,400 2.50
Aug 22 2.56 2.58 2.55 2.56 22,901,700 2.56
Aug 21 2.60 2.62 2.56 2.57 36,447,100 2.57
Aug 20 2.60 2.64 2.56 2.56 68,008,600 2.56
Aug 17 2.60 2.60 2.55 2.56 35,617,300 2.56
Aug 16 2.55 2.60 2.51 2.59 85,830,600 2.59
Aug 15 2.56 2.57 2.48 2.55 81,646,500 2.55
Aug 14 2.52 2.54 2.47 2.53 83,388,900 2.53
Aug 13 2.49 2.52 2.48 2.51 75,452,000 2.51
Aug 10 2.38 2.49 2.37 2.48 137,504,700 2.48
Aug 9 2.49 2.49 2.33 2.40 121,543,600 2.40
Aug 8 2.28 2.51 2.28 2.48 325,124,500 2.48
Aug 7 2.25 2.34 2.22 2.30 191,370,900 2.30
Aug 6 2.17 2.23 2.17 2.20 67,401,800 2.20
Aug 3 2.13 2.17 2.12 2.16 31,099,800 2.16
Aug 2 2.14 2.16 2.10 2.11 31,450,400 2.11
Click to enlarge

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 Est Current Qtr.
Sep 12
Next Qtr.
Dec 12
Current Year
Dec 12
Next Year
Dec 13
Avg. Estimate 0.03 0.02 0.55 0.10
No. of Analysts 12.00 12.00 10.00 11.00
Low Estimate 0.02 0.02 0.53 0.06
High Estimate 0.03 0.03 0.56 0.14
Year Ago EPS 0.02 0.01 0.07 0.55
Click to enlarge

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
Click to enlarge

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.