This past week, Sirius XM Holdings (NASDAQ:SIRI) surged above penny stock status on short squeeze momentum. The radio broadcasting stock had been trending downward for months. But recently, as many high-growth tech stocks slumped on negative market momentum, this struggling company started skyrocketing. This surge was sparked by what has been described as a “violent short squeeze,” but as SIRI stock surged to impressive heights, the Nasdaq imposed multiple trading halts in a clear attempt to protect investors from the concerning volatility. This type of occurrence is commonplace when a heavily shorted stock experiences that type of price action.
Since then, SIRI stock has slipped back into the red, suggesting that the squeeze is over just as quickly as it began. Multiple Wall Street analysts have also raised concerns about the stock, urging investors to take profits and run before it falls further.
Time to Sell SIRI Stock?
As of this writing, SIRI stock has fallen more than 10% and isn’t showing any signs of a significant rebound. This isn’t surprising. Data from Fintel makes clear that the stock is heavily shorted, with short interest accounting for almost 34% of its float. Its recent surge likely excited the retail trades who sit around waiting for the next big short squeeze. However, experts have made it clear that Sirius XM is not a stock worth holding. In fact, three Wall Street analysts have downgraded it since the squeeze began, urging investors to shift their focus elsewhere.
Jeffrey Wlodarczak of Pivotal Research expects SIRI stock to drop back into the penny stock category soon. He responded to the recent events by lowering his price target to $4.50 and downgrading it from a “hold” to a “sell” rating. As he stated in a note to investors:
“In the end fundamentals/valuation (not short covering/index reweighting) inevitably matter and with 42+% downside to our new target price we are downgrading our rating to SELL.”
Deutsche Bank’s Bryan Kraft issued a similar take. Although he maintains a higher price target of $6.25 per share, the analyst double-downgraded SIRI from a “buy” rating to a “sell.” He notes that his team attributes the price action to “technical factors,” noting the high short interest combined with buying pressure spurred by the upcoming Nasdaq-100 index rebalancing, scheduled for today after the close of markets.
A third downgrade came from Vijay Jayant of Evercore ISI, who issued an “underperform” rating and, like Wlodarczak, set a $4.50 price target for SIRI stock. He recommended that investors consider Liberty Media Corp (NASDAQ:LSXMK), the company that owns most of Sirius XM, instead.
On the date of publication, Samuel O’Brient did not have (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.
