Lowly Nasdaq-100 component Sirius XM Holdings Inc. (SIRI) has lifted into an unusual leadership role, breaking out to a 12-year high above $6.50. Rotational energy has underpinned this retro entertainment play, with cash looking for opportunity after exiting top 2017 tech performers. It is still the lowest-priced index component by a wide margin, trading in the single digits, suggesting greater upside in coming years.
The stock reported in line first quarter earnings and revenue in late April, while reaffirming modest fiscal year 2018 guidance that expects around $5.7 billion in revenues. Growth remains on the slow tack, with just 1 million new subscribers expected in the coming year. It isn't fundamentally cheap despite the low price, with a price-to-earnings (P/E) ratio of 48, but 71% insider ownership has contributed to steady upside since 2016.
SIRI Long-Term Chart (1994 – 2018)
Long-term price history includes the 2007 merger of equals with XM Satellite Radio. XM holders received 4.6 shares of SIRI stock for each held share in that deal. The company came public at $4.50 in September 1994 and eased into a trading range with resistance just above $5.00. It broke out in 1996, entering an uptrend that continued into the new millennium, posting an all-time high at $69.44 at the peak of the bull market. The subsequent decline relinquished those gains, bottoming out at 39 cents in March 2003.
A recovery wave into 2004 stalled at $9.43, marking the highest high in the past 14 years, ahead of a secondary decline that accelerated during the 2008 economic collapse. It posted an all-time low at just 5 cents in the first quarter of 2009 and turned sharply higher, returning to resistance at the December 2007 swing high near $4.00 in November 2013. That marked the rally's end, ahead of sideways action that persisted into a July 2016 breakout.
The stock posted strong gains into March 2017, stalling at $5.53 and dropping through $5.00. A July breakout failed to gain traction, triggering a multi-month decline that posted a higher low in January 2018. Steady upside since that time has carved a series of new highs, lifting into the level traded in January 2006. The monthly stochastics oscillator reached the overbought zone in the latest advance but is showing no signs of rolling over, signaling impressive relative strength.
SIRI Short-Term Chart (2016 – 2018)
A 19-month low at $3.29 ended a downtrend into 2016, giving way to an uptrend that is now entering its third year. The long series of higher highs and higher lows indicates steady buying interest, even though the stock is still trading more than 90% below its millennial peak. Of course, the company enjoys a near monopoly in its niche tech segment, underpinning upside that may continue well into the next decade.
The 2004 high at $9.43 marks the next major resistance level, indicating potential 40% upside from current levels. However, the slow-motion uptrend demands shareholder patience because the rally is unlikely to accelerate from the current snail's pace. The most advantageous entry in this price structure will come when the next downturn finds a tradable low because the bounce off that level could add double digits to long-term gains.
On-balance volume (OBV) broke out above the 2013 high in September 2016 (red line), marking a low-risk buying opportunity. Steady interest since that time points to strong but quiet institutional sponsorship that is generating one of the healthiest tech uptrends of 2018. While the slow pace may keep the fast-fingered crowd on the sidelines, many shareholders are undoubtedly grateful for lower volatility and fewer sleepless nights. (See also: Uncover Market Sentiment With On-Balance Volume.)
The Bottom Line
Sirius XM has broken out to 12-year high in the third year of a steady uptrend that shows significant upside potential into the next decade. (For additional reading, check out: Can Apple, Amazon, Pandora, Compete With Spotify?)
<Disclosure: The author held no positions in aforementioned securities at the time of publication.>