Is A Powerful Short Squeeze Brewing With Sirius XM (SIRI) stock?
Shorts on parade in SIRI
This summer has been brutally hot. Air conditioners at the office run 24/7 at the Turbo Option Trading office and even then the dry heat of summer 2024 will have you sweating buckets. The heat has been turned up in the markets well, as evident by the tumble the indexes have taken during the week of 7/21/2024 led by NVDA losses. This is price action that was predicted with our “Summer Short” post & video a month ago.
While traders are fearing the end of AI hype, one may wonder what could bulls target in conditions like these? We’ll tell you: Short Squeezes. When the bears come out to play a stock could fall fast, short positions pile up and squeeze opportunities can arrive with a positive catalyst or sudden bullish reversal. The dedicated squeeze hunters in the Live Trading Room are always hunting for setups like this and now eyes have turned to Sirius XM ($SIRI) stock.
Sirius XM enters the chat
Shorts have a good reason to target this company. Streaming powerhouses have long threatened the world of radio to the point that it’s a wonder Sirius has lasted as long as it did. It may have something to do with it’s unique model, where online and terrestrial radio stations rely heavily on advertising , Sirius XM brought in under 19% of its $2.16 billion in first-quarter revenue from advertising. Advertising revenue can be volatile due to economic factors. SIRI however gained 70% from subscriptions in a unique niche as the only licensed satellite radio operator.
Still, one look at the chart shows that bears aren’t impressed with this. At the time of this writing the stock is down over 28% year to date. However it is not without upside. Beyond the ability to maintain it’s niche SIRI could find itself within the sights of retail investor squeeze hunters thanks to upcoming catalysts.
Short Squeeze Catalysts
Sirius XM’s impending merger with Liberty Media is set to simplify its ownership structure and is expected to be completed in September 2024. This strategic move could potentially influence the stock’s performance as mergers often lead to increased market scrutiny and investor interest. The anticipation of the merger has already had an impact on the stock’s price action, with it experiencing significant volatility. The stock has seen a notable rise from its 52-week low, which could be attributed to both merger expectations and its short squeeze potential.
In spite of the bears betting against it to start the year, Warren Buffet took a position back in February lighting the spark that could become a wildfire. This purchase by Buffet could be inspired by the upcoming merger, potential undervalued status and perhaps even the squeeze potential.
Short Interest
Short interest in this stock has been substantial, with recent reports indicating a short interest ratio of 4.2 days to cover and a short percent of float at 24.92%. This level of short interest suggests that a significant portion of the stock’s tradable shares are sold short, which is a condition that can lead to a short squeeze if the stock price begins to rise and short sellers rush to cover their positions. We’ve played sudden spikes like this before with our Beyond Meat (BYND) short squeeze earlier in the year. Siri has even more potential.
Conclusion
While the possibility of a squeeze exists, it is contingent on a confluence of factors including investor reactions to the merger completion, the effects of the reverse stock split, and the actions of short sellers in response to price movements. As with any investment, potential rewards come with risks, and investors should conduct thorough due diligence before making decisions. The upcoming months will be critical for the company as these events unfold and the market digests the implications for the stock’s future.
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