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The bears are finally giving Sirius XM Radio (NASDAQ: SIRI ) a break.
Short interest finally declined after four consecutive upticks in the exchange's bimonthly updates. After peaking at more than 414 million shares sold short at the end of February -- the highest level of pessimism for the satellite radio provider in more than a year -- there were fewer than 400 million shares of Sirius XM sold short as of mid-March.
Obviously, not all of the naysayers are gone. With 399.8 million shares sold short, Sirius XM remains the most shorted company on any stateside exchange if we go by the number of bearish wagers.
However, it's interesting to note that some of the shorts are starting to punch out as this month comes to a close.
There are some very good reasons for that, so let's go over them.
1. Auto sales in March should be strong.
Car manufacturers will chime in next week with auto sales figures for the month of March.
These figures have been generally robust since the industry bottomed out three years ago. New-car sales rose 3.7% in February, and that was with fears that consumers would hold back on big-ticket purchases after seeing their paychecks shrink in January when the payroll tax stimulus plan ended.
The pent-up demand is certainly still there. The average car has been on the road for a whopping 11 years. New-car sales are the lifeblood of satellite radio, and another strong month would all but assure that Sirius XM had a strong quarter when it comes to gross subscriber acquisitions.
2. Sirius XM could come out with positive subscriber numbers.
When Sirius XM has a strong quarter, it often doesn't wait until its next quarterly report to shout it out loud.
On Jan. 9, the media giant announced that it closed out 2012 with more than 2 million net subscriber additions, and it has often chimed in with impressive account tallies shortly after the quarter comes to a close.
A positive press release in early April is certainly possible, detailing how far Sirius XM has come since closing out last year with 23.9 million subs.
3. The Liberty Media saga is playing itself out.
Things got interesting as Liberty Media (NASDAQ: LMCA ) increased its stake from 40% to a controlling stake over the past year, but now things are settling down.
Liberty Media doesn't seem to be in a major hurry to either spin off Sirius XM to its stakeholders or swallow it whole.
Liberty Media's move to buy a roughly 27% stake in Charter Communications last week makes it unlikely to make a major move on Sirius XM. The deal for Charter -- the country's fourth largest cable provider -- is for a hearty $2.6 billion.
Liberty Media letting Sirius XM play itself out instead of buying it outright may give shorts one fewer catalyst to worry about, but it also should solidify operations by letting the company focus on its day-to-day operations.
4. Jim Meyer is ready to take chances.
When Mel Karmazin carried out his threat to leave Sirius XM late last year, the company made the safe replacement in promoting Jim Meyer to CEO. He's technically the interim CEO, but he's also the odds-on favorite to stay at the helm.
Liberty Media's top brass have publicly supported Meyer, and he's done everything right so far.
However, Meyer still needs the signature content acquisition to cement his status as the worthy chief of premium radio. Karmazin had and kept Howard Stern. Now it's Meyer's turn to pluck a terrestrial radio personality or magnetic celebrity for the realm of satellite radio, and for more than just a temporary station.
Netflix has exploded in popularity since breaking into original programming last year, and Sirius XM needs to follow that lead since it charges twice as much for its premium radio service than Netflix does for its premium video service.
As two of the country's few entertainment platforms that have attracted more than 20 million paying customers, they can learn from each other. Netflix spikes on original or exclusive content deals, and Sirius XM will do the same if investors believe that the programming additions will attract new subscribers and retain existing accounts.
With so many catalysts potentially popping up, it's no wonder that the wave of pessimism is passing on Sirius XM. Those betting against Sirius XM would rather go out on their terms instead of waiting for a short squeeze to flush them out at higher price points.
Premium research on premium radio
Despite Sirius XM being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in The Motley Fool's premium report. To get started, just click here now.