SiriusXM Analysts Turn Bearish As Short Squeeze Grips Stock

SiriusXM Holdings Inc SIRI became the focus of meme stock investors, experiencing a nearly 66% surge in share prices due to a short squeeze. However, the stock later retreated following analyst downgrades. Here's what investors need to know.

What Happened: On Thursday, SiriusXM shares surged as much as 66% — which led to an upside volatility halt — putting short sellers, comprising over 33% of all shares, and a staggering 57% of those outside of listed exchanges, in a tight spot.

The squeeze propelled the stock to close at $7.81 per share. But, at the time of writing on Friday, shares have fallen over 10% to $7.00 as investors retreat from the beleaguered company following analyst downgrades.

The Deutsche Bank Analyst: Bryan Kraft downgraded SiriusXM from a Buy to a Sell rating, while maintaining its $6.25 price target.

Kraft's downgrade comes after Thursday's surge, with the bank saying the drastic uptick is mainly due to technical elements like high short interest combined with preemptive buying driven by the impending NASDAQ 100 — tracked by the Invesco NASDAQ 100 ETF QQQM — rebalance.

While continued index-driven purchasing and potential short covering might further boost the stock, Deutsche maintains a bearish perspective due to overvaluation.

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The Seaport Research Analyst: David Joyce downgraded SiriusXM from a Neutral to a Sell rating, and assigned a $4.50 price target on the stock.

Joyce acknowledged a slight increase in SiriusXM’s self-pay net adds estimate for the year, but argued that the minor boost in revenue and EBITDA estimates do not warrant the recent wild movement in SiriusXM’s shares.

Citing previous occurrences of similar price actions, Seaport expects SiriusXM shares to settle down soon.

The NASDAQ-100 rebalancing may have triggered the buying of about 15 million SiriusXM shares by the Invesco QQQ Trust QQQ, according to a Barron's report.

Some also attribute the stock’s sudden surge to investors unwinding a trade where they were long shares of Liberty Media Corp Series A LSXMA, a stock created by Liberty Media which tracks, and shorts SiriusXM.

The spread between Sirius and Liberty Sirius is now about 55% as a result of the squeeze and rebalancing, according to Barron's.

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