Solar Sector Jumps on Citi Upgrade
The solar space is among the market's leading sub-sectors on Tuesday after an upgrade from Citigroup analysts. With the Dow up triple digits, the beaten down solar sector is jumping as traders and investors scoop up cheap solar names. Shares of SunPower Corp. (NASDAQ: SPWR) are leading the way after the stock was upgraded to Buy at Citi. The stock has surged more than 18% to $6.64 on the session.
Citi also upgraded Yingli Green Energy (NYSE: YGE) to Buy and reiterated Buy ratings on Trina Solar (NYSE: TSL), MEMC Electronic Materials (NYSE: WFR) and Advanced Energy Industries (NASDAQ: AEIS). All of these stocks are higher on the day, with shares of AEIS rising 15% to $13.73. YGE has jumped 8.24% to $3.94, TSL is up 6.20% to $7.71 and WFR has added 2.37% and is trading at $3.67.
The Citi analysts wrote that sell-through has reached an inflection point and has ramped up in recent weeks. They wrote, "Our field work indicates product sell-through -- particularly in Europe -- has increased significantly in the past 1-2 weeks and utilization rates at Tier 1/2 cell/module producers have begun to spike higher."
The analysts noted that any kind of turning point in solar demand should be provide considerable upside to stocks in the sector as negative sentiment is still quite pervasive. Shares have gotten so beaten down as a result of subsidy cuts in countries such as Germany, that they may be presenting a significant value opportunity at current levels.
YGE, for example, has fallen nearly 69% over the last 52-weeks, and TSL has lost more than 72% during the same time period. SPWR is down 70% over the last year. Another catalyst for the entire sector in the wake of Citi's upgrade is the heavy short-interest in these names.
Short-covering could potentially set up a powerful multi-day rally in some of these names. TSL has 20% of its float sold short. Both YGE and WFR have short interests above 11%. If these short-sellers begin to aggressively cover their bets, many solar stocks could be considerably higher in a couple of weeks.
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