After Sirius XM (NASDAQ:SIRI) shares closed 42.3% higher on Thursday, and following a 115% rally in the last 4 weeks, at least three Wall Street analysts lowered ratings on the stock.
While there is no clear catalyst behind a SIRI stock rally, analysts believe the real reason is the fact that SIRI is of the most shorted names on Wall Street. Another reason that could explain the rally could be SIRI’s reweighting in the Nasdaq 100, according to Pivotal Research analysts.
The analysts downgraded the stock to Sell from Hold with a price target of $4.50 per share.
“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,” they said in a note.
Deutsche Bank analysts double downgraded from Buy to Sell with a price target of $6.25.
"We believe this move higher has been driven by technical factors - very high short interest combined with buying ahead of the NASDAQ 100 rebalance after the close on July 21."
Similarly, Evercore ISI analysts downgraded to Underperform with a price target of $4.50.
“Sirius XM is now by far the most expensive stock in our US cable & telecom coverage universe with secular concerns about the long-term growth,” the analysts wrote.
“We recommend that investors rotate into Liberty Sirius (LSXMA/K), which owns 83% of SIRI, given its 61% discount to NAV.”
SIRI shares are down 9.7% in pre-market Friday.