We recently started a series called “Penny Stock of the Day”. These ideas are geared towards traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Sirius XM Holdings Inc. (NASDAQ: SIRI)
Today’s penny stock pick is the audio entertainment company, Sirius XM Holdings Inc. (NASDAQ: SIRI).
Sirius XM Holdings Inc. operates an audio business including subscription entertainment services in the United States. It operates through Sirius XM, Pandora, and Off-platform segments. The company’s Sirius XM segment provides music, sports, entertainment, comedy, news, traffic and weather channels, and other content, as well as podcast and infotainment services on a subscription fee basis; and live, curated, and exclusive and on-demand programming services through satellite radio system and streamed via applications for mobile and home devices, and other consumer electronic equipment.
Its Pandora and Off-platform segment operates a music and podcast streaming platform, which offers a personalized experience for listeners through computers, tablets, mobile devices, vehicle speakers, and connected devices. In addition, the company offers podcasts including true crime to politics, sports, comedy, and other podcasts under the Stitcher brand. Further, it distributes satellite radios through automakers and retailers, as well as its website.
The company also provides location-based services through two-way wireless connectivity, including safety, security, convenience, remote vehicle diagnostic, maintenance and data, and stolen or parked vehicle locator services.
Additionally, it offers satellite television services, which offer music channels on the DISH Network satellite television service as a programming package; Travel Link, a suite of data services that include graphical weather, fuel prices, sports schedule and scores, and movie listings; and real-time traffic and weather services, as well as music programming and commercial-free music services for commercial, office, restaurants, and other business.
Website: https://www.siriusxm.com
Latest 10-k report: https://investor.siriusxm.com/sec-filings/all-sec-filings/content/0000908937-23-000006/siri-20221231.htm
Analyst Consensus: As per TipRanks Analytics, based on 10 Wall Street analysts offering 12-month price targets for SIRI in the last 3 months, the stock has an average price target of $5.31, which is nearly 9% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The stock is rumored to be gaining popularity as a meme stock. Traders are also looking for a repeat of the recent spike in price caused by a mammoth short squeeze.
- Hedge Funds Increased Holdings by 322.5K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- SIRI is the only licensed satellite radio operator. Being a legal monopoly gives the company exceptional subscription pricing power. It may be noted that nearly 79% of the company’s total revenue comes from high-margin subscriptions.
- Corporate Insiders Bought Shares Worth $118.0K in the Last 3 Months.
Insiders | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has currently broken out a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
SIRI – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above its 50-day SMA as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#6 Above Support Area: The weekly chart shows that the stock is currently trading above a resistance-turned-support area, which is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
SIRI – Weekly Chart
#7 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for SIRI is above the price of $5.00.
Target Prices: Our first target is $5.70. If it closes above that level, the second target price is $6.20.
Stop Loss: To limit risk, place a stop loss at $4.60. Note that the stop loss is on a closing basis.
Our target potential upside is 14% to 24%.
For a risk of $0.40, our first target reward is $0.70, and the second target reward is $1.20. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has ongoing legal proceedings. SIRI is a defendant in various lawsuits and arbitration proceedings, including derivative actions; actions filed by subscribers, both on behalf of themselves and on a class action basis; former employees; parties to contracts or leases; and owners of patents, trademarks, copyrights or other intellectual property.
- SIRI faces substantial competition and that competition is likely to increase over time.
- The company’s business depends in part upon the auto industry. A substantial portion of the subscription growth for SIRI’s satellite radio service has come from purchasers and lessees of new and used automobiles in the United States.
- The company executives are being paid significant compensation, despite the company’s declining revenues.
SIRI – Executive Compensation
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
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