Sirius' Unexplained Drop Fuels The Long/Short Debate

| About: Sirius XM (SIRI)
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The third quarter certainly ended with a thud, with the DOW dropping well over two hundred points amidst fears of the economic collapse of multiple European Union States and plenty of uncertainty on the American continent as well.

SiriusXM (NASDAQ:SIRI) was not spared from the chaos.

Last Thursday saw SIRI shares drop by ten percent on significant volume - significant even for the heavily-traded SIRI - and Friday's close of $1.50 was well off the 52-week high.

Even as the entire market has faltered, this volatile action with SIRI shares has spurred debate between the longs and shorts as to which way the company - and its share price - is headed.

The shorts believe that SiriusXM's day is done, as the iPod, Pandora and a plethora of other options become available to fill up the 'AUX' option on car dashboards. This group also believe that the global economic slow down will also hurt auto sales - from which SiriusXM brings in much of its revenue - and also hurt consumers enough that will keep them from shelling out that discretionary spending on a luxury such as SatRad.

The longs believe that the company is still growing, and that new subscribers, new services and SiriusXM 2.0 will be enough to propel the company to the next level as the economy rebounds.

In turn, believe the longs, the SIRI share price has significant room to grow.

These debates have been much talked about since Thursday's drop, as investors and media speculators have dug in and taken their positions.

That means that the fourth quarter - usually a good one for the company with holiday sales coming in strong - could start out with an added bang.

All will be watching for the release of third quarter numbers. The trend in 2011 for SiriusXM has been a positive one, with the second quarter release confirming the early-year uptick in sales and subscribers. The evidence is there that the consumer is still forking out that discretionary spending to pay for services such as satellite radio, and that bodes well for those predicting more of the same in the third quarter numbers.

The company has concentrated on paying down its debt early and adding new content, and it's that content, in my opinion, that puts the company a cut above the alternatives. For as much attention as that 'AUX' button gets with the iPods and such, you've got to be listening to current channels to know what to download onto the iPod - and SIRI arguably offers the largest selection out there.

No one is expecting this market to turn itself around, and stories such as SIRI are going to pop up on a regular basis as the economy continues its volatile course, but it's a fair bet as well that this company's worst days are behind it.

While still growing, and still adding new content, the current buck-and-a-half share price should look awfully tempting for those that have long been on the SiriusXM bandwagon.

As the longs and shorts battle this one out, yet again, there's a pretty good chance that the current volatility will have SIRI approaching the two dollar mark again, barring any major setbacks on the earnings front, especially since no news seemed to accompany the slide to a buck-fifty.

Should be an exciting quarter.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIRI over the next 72 hours.