SiriusXM (NASDAQ:SIRI) stock rose 42% on July 20, and trading was halted as a short squeeze seemed to be in play.
Fintel reported that over 33% of all shares, and 57% of those outside listed exchanges, were being held short. This brought on a squeeze that helped the stock close at $7.81 per share, a market capitalization of over $30 billion.
The squeeze abated overnight after analysts put a “sell” rating on the stock. SIRI stock fell over 10% premarket and opened this morning, July 21, at about $7 per share.
Lemons Make Lemonade
SiriusXM was formed in 2008 by the merger of two competing satellite broadcast networks in a deal then worth $3.3 billion. Sirius was best known in the 2000s for signing talk show host Howard Stern from terrestrial radio.
But for the last half-decade, SiriusXM has been a terrible investment. Before the short squeeze, the stock was selling for half what it sold for in July 2018.
This happened despite regular dividend increases. The company was paying $0.011/share in 2018 and now pays $0.024/share every quarter. That’s a yield of 1.76%.
The problem is that since 2019 the business has only been growing at single-digit rates. Management has squeezed down costs so that it brought 13% of revenue to the net income line in 2022. It earned $1.2 billion, 31 cents/share, on revenue of $9 billion. But revenue has been flat over the last four quarters, down by 6% in the March quarter.
SiriusXM has been trying to expand beyond satellite radio, buying the Earwolf comedy podcast network for $325 million in 2020. Talent left as the company pivoted toward hits, away from what made the business work. SiriusXM decided to shut down Earwolf’s Stitcher app in June, pushing subscribers to its own SXM app.
SIRI Stock: What Happens Next?
Investors who get in on a short squeeze need to know when to get out. But when the gun goes off, the rush to the door could leave you holding the bag. In this case, the bag is a slow-growth stock whose fundamentals are poor.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
