Short Sellers Take A Shine To SolarCity And SunEdison (GTAT, SCTY, SUNE)

Among the leading U.S. solar-related stocks, GT Advanced Technologies GTAT, SolarCity SCTY and SunEdison SUNE saw significant increases in the number of shares sold short in the first two weeks of May.

Short sellers shied away from First Solar, RGS Energy and SunPower Holdings between the April 30 and May 15 settlement dates. But short interest in Advanced Energy Industries also increased somewhat during the period.

In addition, the number of U.S.-listed shares (or ADRs) sold short of foreign-based companies Hanwha SolarOne, JA Solar Holdings, JinkoSolar and ReneSola grew, but short interest in Canadian Solar, China Sunergy, Trina Solar and Yingli Green Energy shrank in the period.

Related: First Solar Collaborates With Rio Tinto

Here is a quick look at how GT Advanced Technologies, SolarCity and SunEdison have fared and what analysts expect from them.

GT Advanced Technologies

This Nashua, New Hampshire-based company saw short interest grow about eight percent in the first weeks of the month to more than 43.01 million shares, or about 32 percent of the float. That was the highest number of shares sold short since last August, and the days to cover fell from six to less than five.

The crystal growth equipment provider for the solar and electronics industries posted a slightly deeper-than-expected loss in its most recent quarterly report. The company has a market capitalization of more than $2 billion. The long-term earnings per share (EPS) growth forecast is almost 48 percent, but the return on equity and the operating margin are in the red.

All but three of the 11 analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares. That has been the consensus recommendation for the past two months. The mean price target, which is where the analysts expect the share price to go, is almost 23 percent higher than the current share price.

As of the close on Tuesday, the share price was up almost 75 percent since the beginning of the year. It did slip below the 50-day moving average earlier this month but seems poised to recover. The stock has outperformed larger competitor Applied Materials and the broader markets over the past six months.

SolarCity

Short interest in this provider of solar energy systems to residential and commercial customers saw a gain of about 15 percent to about 11.51 million shares. That was the highest number of shares short so far this year, and it represents about 25 percent of the float. The days to cover was about two.

This San Mateo, California-based company posted a smaller net loss for the most recent quarter and raised its forecast on strong demand for solar installations. SolarCity has a market cap of nearly $5 billion. Note that both the return on equity and the operating margin remain in negative territory.

Eight of the 10 polled analysts recommend buying shares, and only one rates the stock at Underperform. The ongoing pullback has left plenty of headroom for the stock, relative to the analysts' mean price target. But shares have traded higher than that consensus target as recently as mid-March.

Shares hit a year-to-date low in early May. The 50-day and the 200-day moving averages seem poised for a death cross. The stock has underperformed not only the Nasdaq and the S&P 500 in the past six months, but also smaller competitor RGS Energy as well.

Related: Solar Industry Moves Higher On Trina Earnings

SunEdison

The number of shares sold short in the former MEMC Electronic Materials increased almost 11 percent in the period to around 58.13 million, or more than 23 percent of the float. Short interest has been rising since the end of January. 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 posted a wider-than-expected net loss in the period. SunEdison has a market cap near $5 billion. Here too, the return on equity and operating margin are in the red. Net losses are forecast for the current quarter and the full year.

Eleven of the 12 analysts polled recommend buying SunEdison shares, with four of them rating the stock at Strong Buy. They see plenty of headroom for shares, as their mean price target indicates more than 14 percent potential upside. That consensus target would be a new 52-week high.

The share price retreated less than 10 percent during the period, but it is up about seven percent in the past week, rising above the 50-day moving average again. Over the past six months, the stock has outperformed the likes of Advanced Energy Industries and Analog Devices.

At the time of this writing, the author had no position in the mentioned equities.

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