Sirius XM Holdings Inc. (NASDAQ:SIRI) is scheduled to release its fourth-quarter earnings report ahead of Thursday’s opening bell. Currently, Wall Street is expecting the company to post a profit of 3 cents per share, up from 2 cents per share in the same quarter last year.
That said, SIRI stock traders will be playing close attention to subscriber numbers, with Sirius adding 1.7 million in 2014 and expected to add 1.2 million in 2015.
There are signs that Sirius could top the consensus estimate on Thursday. The plunge in oil prices has led to higher auto sales and more discretionary funds in consumers’ pockets. Sirius radios come standard in nearly all new vehicles, so auto sales are important for the company. Reports that last year’s sales of 16.5 million vehicles were the best in nearly eight years bodes well for Sirius.
On the sentiment front, the brokerage community has high hopes for Sirius. According to data from Thomson/First Call, 10 of the 14 analysts following SIRI stock rate it a “buy” or better, compared to only four “holds” and no “sell” ratings. Meanwhile, the 12-month price target of $4.30 represents a healthy 19% premium to Monday’s close at $3.61.
On the options front, calls are the investment vehicle of choice for SIRI stock traders. Currently, the February/March put/call open interest ratio arrives at a reading of 0.04, with nearly all open interest falling on the call side of the tape.
While this may seem unusual, it is typical for stocks trading in the single digits to attract heavy call open interest due to the fact that the stock can only fall so far. That said, this ratio is extremely low, even for SIRI, as it falls below 90% of those taken in the past year.
Click to Enlarge Overall, weekly Feb 6 series implieds are pricing in a potential post-earnings move of about 4.6% for SIRI stock. This places the upper bound at $3.77, while the lower bound lies at $3.45.
A rally past the $3.70 mark would put SIRI stock at its highest point since shortly after the Sirius XM merger. A drop to $3.45, meanwhile, would the stock with technical support at its 50-day moving average as a cushion.
For those traders looking to side with the bulls ahead of Sirius’ quarterly report, a Mar $3.50 call stands a good chance of hitting a double.
At last check, the Mar $3.50 call was asked at 12 cents, or $12 per contract. Breakeven lies at $3.72, while a double can be had if SIRI stock trades at or above $3.84 ahead of March expiration.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
