Short Sellers Take A Shine To First Solar and SunEdison (FSLR, SCTY, SUNE)
Among the leading U.S. solar-related stocks, First Solar (NASDAQ: FSLR), SolarCity (NASDAQ: SCTY) and SunEdison (NYSE: SUNE) saw the largest swings in the number of shares sold short in the final two weeks of March.
Short interest in Advanced Energy Industries and GT Advanced Technologies increased modestly between the March 14 and March 31 settlement dates. Short sellers shied away from RGS Energy and SunPower Holdings during the period.
In addition, the number of U.S.-listed shares (or ADSs) sold short of foreign-based companies China Sunergy, JinkoSolar and ReneSola increased by a double-digit percentages, while in Hanwha SolarOne they grew somewhat. But short interest in Canadian Solar, JA Solar Holdings, Trina Solar and Yingli Green Energy and shrank in the period.
See also: Short Interest Rises As Biotechs Fall
Here is a quick look at how First Solar, Solar City and SunEdison have fared and what analysts expect from them.
Short interest in this Tempe, Arizona-based company rose more than 15 percent from a year-to-date low in the previous period to around 12.23 million. The number of shares sold short represented about 17 percent of the float. It would take more than one day to sell out all short positions.
Strong earnings guidance lifted First Solar shares to a multiyear high during the period. The company has a market capitalization of almost $7 billion. It offers no dividend. The forward earnings multiple is less than the trailing price-to-earnings (P/E), and the operating margin is greater than the industry average.
The consensus recommendation of the 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 higher than the analysts' mean price target, meaning they see no upside potential at this time.
The share price is more than 33 percent higher than a month ago, most of that gain coming on that release of optimist guidance. Shares almost reclaimed the 52-week high this week. The stock has outperformed the likes of Linear Technology and Sharp, as well as the Nasdaq, over the past six months.
Short interest in this provider of solar energy systems to residential and commercial customers retreated more than five percent from a 52-week high in the previous period to more than 10.74 million shares. That represents more than 26 percent of the float. Days to cover dropped to less than two.
This San Mateo, California-based company twice delayed its fourth-quarter report and finally posted a smaller-than-expected net loss in March. SolarCity has a market cap of about $5 billion, but it does not offer a dividend. Both the return on equity and the operating margin are in negative territory.
Just four of the 10 polled analysts recommend buying shares, but only one rates the stock at Underperform. The recent pullback as left plenty of headroom for the stock, relative to the analysts' mean price target. A move to the consensus target would be a more than 26 percent gain.
The share price has fallen about 24 percent in the past month, dropping well below the 50-day moving average but still about the 200-day moving average. The stock has outperformed not only the Nasdaq and the S&P 500 in that time, but also smaller competitor RGS Energy.
The number of shares sold short in the former MEMC Electronic Materials grew about 11 percent in the period to more than 54.25 million, or more than 20 percent of the float. That was the highest level of short interest in the past year. It would take more than four days to close out all of the short positions.
One of the world's largest solar installers and developers, SunEdison filed for an initial public offering of its semiconductor business during the period. It has a market cap near $4.6 billion. While it has a long-term earnings per share growth forecast of about 15 percent, its return on equity and operating margin are in the red.
Of the 14 analysts surveyed, all but two recommend buying SunEdison shares, with four of them rating the stock at Strong Buy. They see room for shares to run, as their mean price target indicates almost 23 percent potential upside. That target would be a new multiyear high as well.
The share price has retreated more than nine percent in the past month, but it is still more than 32 percent higher year to date. Over the past six months, the stock has outperformed the likes of Advanced Energy Industries and Analog Devices, as well as the broader markets.
At the time of this writing, the author had no position in the mentioned equities.
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