The financially motivated pessimism is finally starting to fade away for Sirius XM Holdings (SIRI -1.60%), just as shares of the satellite radio provider gradually recover from the 52-week lows they hit earlier this month. Sirius XM stock moved higher last week, a newsworthy nugget only because it's something that the media giant failed to do in each of the five previous trading weeks.
There were 175.1 million shares of Sirius XM sold short at the end of May, a large number but still the fifth consecutive reporting period of decelerating short interest. Outside of a brief spell in mid-February this is the lowest number of bearish wagers placed on Sirius XM Holdings over the past year. Naturally it doesn't help if naysayers move out but the bulls don't move back in, but there are some signs that Wall Street is starting to warm up to the buying opportunity here. Brian Russo at Credit Suisse upgraded the stock last week, and this week is kicking off with Sebastiano Petti at JPMorgan reaffirming his bullish stance on the shares with a new analyst note.
Making bullishness fashionable again
JPMorgan's Petti feels that Sirius XM's fundamentals will continue to improve during the current quarter, despite challenging comparisons from the second quarter of the prior year, when Sirius XM checked in with 483,000 net new self-pay subscribers and a historic low self-pay churn rate of 1.6%. Petti sees favorable trends accelerating through the second half of the year. He expects Sirius XM's namesake satellite radio platform to stay robust as the earnings drag from the recently acquired Pandora eases.
The analyst considers Sirius XM one of the more compelling valuations in the firm's coverage universe. He's sticking to his overweight rating on the stock, and his $7 price target translates into 26% of upside from here. Russo's upgrade at Credit Suisse a week earlier also came with a $7 price target. Pivotal Research analyst Jeffrey Wlodarczak also offered up a $7 price target when he boosted his rating on the shares a few weeks earlier. Lining up all these sevens in a row is lucky on a slot machine, but Sirius XM needs more than Lady Luck on its side if it's going to recover to anywhere close to last year's highs.
Wall Street pros have been tiptoeing back into bullish positions on Sirius XM following a sell-off after a rough first quarter in late April. This is actually Petti's second update since the sell-off, as he also rang the dinner bell late last month by calling this a buying opportunity.
Analysts are coming around, and the bears are gradually clearing out. Momentum is finally starting to favor the bulls, but Sirius XM will need to make sure that the second-quarter report that will come out late next month doesn't disappoint like its last financial outing.