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Sirius XM Stock Is No Longer a Short Magnet

By Rick Munarriz – Apr 16, 2018 at 3:11PM

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The short interest ratio for the satellite radio provider is at its lowest level in more than a year.

Bears seem to be quietly bowing out of betting against Sirius XM Holdings (SIRI 2.23%). There were 200.2 million shares of the satellite radio provider sold short as of the end of March. That's a big number, but 200.2 million is actually the stock's lowest short interest in more than a year -- more than 266 million shares were sold short a year ago.

Sirius XM is no longer a hotbed of speculators. The company's predictably profitable. Revenue growth has slowed to a consistent pace, rising between 8% and 10% in each of the past four years. The media giant shells out a quarterly dividend. Even the stock's one-year beta -- a popular measuring stick for volatility relative to the general market -- has fallen to a historic low of 0.73. There will always be critics, but the number of naysayers willing to put their money where their mouths are and profit from the stock's descent continues to thin out.

Eminem and friends at his Shade 45 studio at Sirius XM

Image source: Sirius XM Holdings.

Toning down the exuberance

This isn't a lovefest for Sirius XM; late last month an analyst even downgraded the stock. Citi analyst Jason Bazinet lowered his rating from buy to neutral, concerned about growth in free cash flow per share decelerating by 2020.

The downgrade didn't inspire bears to play along, as the number of shares sold short decreased from 221 million a week beforehand to a 52-week low of 200.2 million shares shorted a week after the analyst move. There may be legitimate concerns about the near-term ceiling on the stock, but shorts don't think the potential downside seems worth the risk at this point.

We won't have to wait long to get an update on how Sirius XM is holding up: The satellite radio monopoly reports its first-quarter results next week. As long as subscriber counts continue to inch higher with churn and costs held in check -- something that's been par for the course over the past several years -- a downside surprise doesn't seem likely.

The stock's low beta and lighter-than-historical volume suggest that the upside may also be kept in check following the report. The radio darling began the year with a record 32.7 million subscribers, and everyone's bracing for marginal growth on that front, as its addressable market of active commuters seems to be effectively tapped at this point.

Sirius XM did issue conservative guidance for 2018 at the time of its fourth-quarter report, but if it lifts some of its projections it would merely be the company doing what it has done more often than not in the past; it consistently cranks out soft guidance that it can easily top and adjust higher as the year plays itself out. Sirius XM has become a sleepy low-growth stock, and that's not a bad thing as it swaps out speculators at both ends of the trade with long-term investors.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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