Sirius XM: Still Not Time To Get Back In

| About: Sirius XM (SIRI)

For those who are familiar with my writings, you'll know that in May, I liquidated my position in Sirius XM (NASDAQ:SIRI) as I saw lower share prices approaching for a multitude of reasons, which you can read about here. As someone who fully expected that Sirius XM shares would be at multi-year highs at this point, I was taken a bit off guard when the share price began to fall after Liberty Media (LMCA) petitioned the FCC for "de facto" control of Sirius XM.

I've received many questions regarding my price target, as for months I was claiming my personal fair value for Sirius XM shares to be at $2.75. My answer? My current price target is still the same $2.75 it has always been. This is often followed by the question, "then why did you sell?" At which point I link the article above.

You see, I don't think Sirius XM is a bad company. I don't think Pandora (NYSE:P), Spotify, iHeart Radio, Apple (NASDAQ:AAPL), or the boogeyman are going to suddenly jump out of the shadows and drop an axe into Sirius XM's back and kick it into the grave. I see potential in the company that I feel has had a virtual clamp held around it by the big daddy Liberty Media, which holds veto power and for all intents and purposes, all meaningful control of Sirius XM. I see a flexible platform, Sirius XM 2.0, ready to take on the transition from satellite to IP delivery, in a smooth and uninterrupted fashion. I see a future in the hands of Liberty Media, which I feel will be bright once Liberty's clamp is removed and Sirius XM is under its full control. I'm long Sirius XM in spirit, but just not long Sirius XM with my wallet, for the short term.

Monday's close gave additional confirmation to that. Not much has happened in the last month since I sold. Sirius XM has gone up, and it has gone down, and then it has gone right back up (and down) again, trading in a range from $1.84 up to $2.04 down to Monday's close of $1.815. The problem with the company? Nothing new from a fundamental standpoint. Sirius XM is growing and on track to meet or beat current guidance for the year. A billion in cash by the end of the year, debt being paid down, subscribers, revenue, profit, earnings, all rising. Regardless of these things, Sirius XM is in a technical downtrend and several things are not helping. Again, to understand where I am coming from it will help to read my previous article linked above, as well as my article last week here.

There's something important about Monday's close that should be quite apparent. While lower prices have been seen this year, to find a lower closing price you would have to go back to December of 2011. The close of $1.815 brings about some key technical issues, never mind the psychological impact of the lowest closing price of the year. Consider the following charts.

The first is a point and figure chart, showing basic supply and demand, without the noise of time and volume thrown into the mix.

(Click to enlarge)

Take note, there was fairly strong support at $1.83, which has now been broken. Following point and figure analysis, the next price objective is $1.71. To read up on point and figure charting, information is provided at this link here, or you may look up literature by Thomas Dorsey. To view a real time updated chart like the one above feel free to use this link.

The second is a chart that many will be more familiar with. If you'll notice as I wrote last week, there was a "death cross" in the exponential moving averages on June 21st, and this typically precedes a large drop in a stock's share price. This is due partially to the fact that in order for a cross like this to happen, the stock must already be in a bearish downtrend, but also because technical traders use such signals to time their trades, and can cause what is already a problem, to get worse. What appeared to be a brief 3 day rally last week, fizzled out and turned bearish, continuing the current downtrend of lower lows, and lower highs.

(Click to enlarge)

Will the current trend continue? My money is on "yes" and that is why I am remaining in cash, waiting for a better re-entry point. Though I am bullish on Sirius XM's longer term prospects, for now I still do not feel that this is the best time to buy back in. I think for now, without some sort of breaking news to halt the decline, or actual moves (not simply intentions to move) by Liberty which take them to full control, I feel the share price will be under pressure. I still feel more comfortable remaining in cash at the moment, but I am watching the share price and the news, as well as the overall markets, very closely.

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

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