During today's evening trading session, Sirius XM took the market by storm, rocketing to $5.45 per share despite it now being above its mean target price of $4.92. This 4.2% movement implies there may not be much more room for upwards movement for the stock -- if its analysts are to be believed. They 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 29.0%. Each short position represents an investor's expectation and hope that the stock's price will reverse course and start declining.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
We can make inferences about the market sentiment surrounding Sirius XM by analyzing its rate of institutional ownership. If institutions such as hedge funds and pension funds are the primary shareholders of a corporation, it most likely means that its shares are a good investment according to those institutions' analysts.
At 12.5%, the rate of institutional ownership is average, indicating that a sufficient number of institutions have concluded that it is a stable investment. Beware, however, that the rate of institutional ownership could also indicate an ongoing proxy battle or takeover attempt -- so you should also periodically check the news about a stock whose institutional ownership you are tracking.
Overall, there is negative market sentiment on Sirius XM because its an analyst belief that shares are overpriced, a hold rating, an unusually large proportion of its shares sold short, and a very small number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are SIRI's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 1,955,000 | 667,000 | 1,288,000 | -16.9 |
| 2022 | 1,976,000 | 426,000 | 1,550,000 | -3.73 |
| 2021 | 1,998,000 | 388,000 | 1,610,000 | -3.48 |
| 2020 | 2,018,000 | 350,000 | 1,668,000 | 0.85 |
| 2019 | 2,017,000 | 363,000 | 1,654,000 | 8.46 |
| 2018 | 1,880,000 | 355,000 | 1,525,000 |
