Are Insiders Cautious About Sirius XM Holdings Inc (NASDAQ:SIRI) Shares?

Sirius XM Holdings Inc. provides satellite radio services in the United States. Sirius XM Holdings is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 100.00k shares during this period. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative to the market. But these signals may not be sufficient to gain confidence on whether to divest. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.

View our latest analysis for Sirius XM Holdings

Who Are The Insiders?

NasdaqGS:SIRI Insider Trading September 7th 18
NasdaqGS:SIRI Insider Trading September 7th 18

There were more Sirius XM Holdings insiders that have sold shares than those that have bought. In total, individual insiders own over 8.09 million shares in the business, which makes up around 0.18% of total shares outstanding.

The following insiders have recently reduced their company holdings:
Name Management Board Total Annual Compensation
Stephen Cook US$4.3m

Does Selling Activity Reflect Future Growth?

NasdaqGS:SIRI Future Profit September 7th 18
NasdaqGS:SIRI Future Profit September 7th 18

At first glance, analysts’ earnings expectations of 79.6% over the next three years illustrates an upbeat outlook going forward. But this is not consistent with the signal company insiders are sending with their net selling activity. Digging deeper into the line items, Sirius XM Holdings is believed to experience a rather subdued top-line growth over the next year, but a significantly higher expected earnings growth. Usually this discrepancy can be explained by an equally significant drop in costs. However, insiders may recognise this is not a sustainable practice and this negative sentiment is evidenced by their net selling activity. Or they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.

Can Share Price Volatility Explain The Sell?

An alternative reason for recent trades could be insiders taking advantage of the share price volatility. A correlation could mean directors are trading on market inefficiencies based on their belief of the company’s intrinsic value. Sirius XM Holdings’s shares ranged between $7.64 and $6.65 over the past three months. This indicates an immaterial change in share price, with a movement of 14.89%. Potentially, insider transactions are not share price related but may be due to their belief on what will happen to the company in the future or simply just personal cash and diversification needs.

Next Steps:

Sirius XM Holdings’s insiders’ meaningful divestments tells us that their shares have recently fallen out of favour, though the positive growth in expected earnings tells us a different story, and the share price has not moved significantly to warrant reassessment of mispricing. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two fundamental aspects you should further research:

  1. Financial Health: Does Sirius XM Holdings have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Sirius XM Holdings? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.