Market Overview

Short Sellers Return to Solar Stocks

By and large, short sellers moved back into solar-related stocks during the first two weeks of April.

Advanced Energy Industries (NASDAQ: AEIS), First Solar (NASDAQ: FSLR), MEMC Electronic Materials (NYSE: WFR), SolarCity (NASDAQ: SCTY) and SunPower Holdings (NASDAQ: SPWR) all saw short interest in their shares grow between the March 28 and April 15 settlement dates

However, short interest in Real Goods Solar (NASDAQ: RSOL) was essentially flat during that time. And the number of shares sold short in GT Advanced Technologies (NASDAQ: GTAT) decreased.

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

The biggest percentage increases in short interest in the stocks of U.S. solar companies between the March 28 and April 15 settlement dates happened to First Solar, SolarCity and SunPower.

First Solar

Short interest in this solar energy company rose more than 12 percent to 18.43 million shares during the period, reversing an 11 percent decline in the previous period. The number of shares sold short now represents more than 30 percent of the float, though the days to cover dropped to less than two.

This Tempe, Arizona-based company acquired the North Star solar project in California, as well as TetraSun from a Japanese firm, in early April. First Solar has a market capitalization of about $3.8 billion. The forward earnings multiple is lower than the industry average price-to-earnings (P/E) ratio, and the return on equity is in negative territory.

The consensus recommendation of analysts surveyed by Thomson/First Call is to hold First Solar shares, and it has been for at least three months. The current share price is well above their mean price target, meaning analysts see no upside potential at this time. Although, the street-high price target is more than 11 percent higher than the share price.

The share price is up about 41 percent since the beginning of the year and reached a 52-week high yesterday. Over the past six months, the stock has outperformed competitor SunTech Power, as well as the broader markets.

SolarCity

Short interest in this provider of solar energy systems to residential and commercial customers increased more than 25 percent to 3.47 million shares. That is the highest number of shares sold short since the company's initial public offering, and it represent more than 14 percent of the float. Days to cover jumped to more than six.

Solar City began trading publicly in mid-December, and it was added to the Russell 2000 index in early April. The company now has a market cap of around $1.8 billion. Its long-term earnings per share (EPS) growth forecast is almost 36 percent, but its operating margin and return on equity are in the red.

Yet, four of the seven surveyed analysts recommend buying shares, while the other three recommend holding them. Here too, the current share price has overrun the mean price target, and even the highest individual price target. Analysts see no upside potential at this time.

The share price is up more than 89 percent higher year-to-date and reached a post-IPO high today. Over the past six months, the stock has outperformed competitor Renesola, as well as the Nasdaq and the S&P 500.

SunPower

Shares sold short in this integrated solar products and services company surged about 33 percent in the first two weeks of April to about 9.15 million. That was the second highest level of short interest in at least a year and represents about 23 percent of the float. But the days to cover fell to less than two.

Headquartered in San Jose, California, this company has a market cap near $1.5 billion. SunPower dedicated a power plant in Arizona and began construction on two projects in California earlier this month. While the company has a long-term EPS growth forecast of more than 22 percent, its return on equity and operating margin are also in the red.

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

However, the share price jumped more than 26 percent in the past week, and shares are about 100 percent higher year-to-date. The stock has outperformed competitors 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 Technologies J.A. Solar Holdings ldk solar MEMC Electronic Materials Real Goods Solar ReneSola SolarCity SunPower Holdings Suntech Power Holdings Trina Solar yingli green energyShort Ideas Trading Ideas Best of Benzinga

 

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