Decoding SIRI's Recent Price Plunge

During today's morning trading session, Sirius XM plummeted to $5.13 per share. It's still 6.1% above its mean target price of $4.84, so there may still be room for more downwards movement -- even after today's -1.1% drop. Analysts are giving the Broadcasting stock on average rating of hold, with target prices ranging from 3.5 to 7.0 dollars per share.

The market sentiment on Sirius XM seems pessimistic because the proportion of shorted shares in its float is quite high at 28.2%. Each short position represents an investor's expectation and hope that the stock's price will reverse course and start declining.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.

For what it's worth, institutions own 12.9% of Sirius XM's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.

Overall, there is negative market sentiment towards Sirius XM because of an analyst consensus of little upside potential, a hold rating, an unusually large proportion of its shares sold short, and a very small number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about SIRI:

  • It has trailing 12 month earnings per share (EPS) of $0.32 per share

  • Sirius XM has a trailing 12 month Price to Earnings (P/E) ratio of 16.0 while the S&P 500 average is 15.97

  • Sirius XM is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.33 and 3.12 respectively

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.