Market Overview

Short Sellers Focus on SolarCity and SunPower

With a couple of exceptions, the short interest in solar-related companies based in the United States declined in the first two weeks of February.

The short interest in Advanced Energy Industries (NASDAQ: AEIS), First Solar (NASDAQ: FSLR), GT Advanced Technologies (NASDAQ: GTAT) and MEMC Electronic Materials (NYSE: WFR) declined between the January 31 and February 15 settlement dates.

Note though that the number of shares sold short in both SolarCity (NASDAQ: SCTY) and SunPower Holdings (NASDAQ: SPWR) jumped more than 10 percent during that time.

Also, U.S.-listed shares (or ADRs) sold short of foreign companies Canadian Solar (NASDAQ: CSIQ), China Sun Energy (NASDAQ: CSUN), LDK Solar (NYSE: LDK), ReneSola (NYSE: SOL), Suntech Power Holdings (NYSE: STP) and Yingli Green Energy (NYSE: YGE) increased in early February, while short interest in J.A. Solar Holdings (NASDAQ: JASO) and Trina Solar (NYSE: TSL) declined.

The biggest percentage swings in short interest in the stocks of U.S. solar companies between the January 31 and February 15 settlement dates happened to SolarCity and SunPower, as mentioned above, as well as to Advanced Energy Industries.

Advanced Energy Industries

This maker of power conversion products saw short interest fall more than 11 percent in early February, after declining more than 21 percent in the previous period. That mid-February figure was the lowest number of shares sold short in at least a year, as well as the largest average daily volume since May. Short interest is about three percent of the float.

The company posted better-than-expected revenues in its most recent quarterly report, and it saw an upgrade from a Citigroup analyst afterward. Advanced Energy Industries has a market capitalization of more than $680 million. The price-to-earnings (P/E) ratio is higher than the industry average, but the long-term earnings per share (EPS) growth forecast is about 15 percent, and the operating margin is greater than the industry average.

Only two of the seven analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares, but none of them recommend selling. The mean price target, which is where the analysts expect the share price to go, is only marginally higher than the current share price and less than the recent multiyear high.

The share price has risen more than 26 percent since the beginning of the year and reached that new high last week. The stock has outperformed competitor MKS Instruments (NASDAQ: MKSI) and the broader markets over the past six months.

SolarCity

Short interest in this provider of solar energy systems to residential and commercial customers increased about 11 percent to 2.61 million shares. The number of shares sold short now is more than 17 percent of the float, after rising in each of the five past reporting periods.

Solar City began trading publicly in mid-December. The company now has a market cap of around $1.3 billion. It currently has no long-term EPS growth forecast, and its operating margin is in negative territory.

But four of the six surveyed analysts recommend buying shares, while the other two recommend holding them. Here too, the current share price is in the same ballpark as the mean price target. However, the highest individual price target represents potential upside of about 15 percent. That target would be a post-IPO high.

The share price is up almost 47 percent year to date, despite pulling back more than six percent in the past week. Over the past three months, the stock has outperformed the Nasdaq and the S&P 500, but underperformed competitor Renesola.

SunPower

Shares sold short in this integrated solar products and services company jumped more than 33 percent in the period to about 8.86 million, the highest number in at least a year. The short interest has been rising since the beginning of the year and is now more than 22 percent of the float.

Headquartered in San Jose, California, this company has a market cap near $1.4 billion. It posted a wider net loss in its most recent quarterly report and warned that revenue would be flat in 2013. While the company has a long-term EPS growth forecast of more than 22 percent, its return on equity is in the red and the operating margin is less than the industry average.

The consensus recommendation of 17 analysts polled is to hold shares, and it has been for at least three months. And note that the current share price has far outstripped the mean price target, suggesting that the analysts have stopped paying attention here.

However, the share price is up more than 91 percent year to date, despite pulling back about 12 percent from a recent 52-week high. The stock has outperformed First Solar and Suntech Power, as well as the S&P 500, over the past six months.

Posted-In: Advanced Energy Industries canadian solar China Sun Energy First Solar GT Advanced TechnologiesLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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