Market Overview

Short Interest In SolarCity Spikes, First Solar Falls (AEIS, FSLR, SCTY)

Short Interest In SolarCity Spikes, First Solar Falls AEIS, FSLR, SCTY

Among the leading U.S. solar-related stocks, Advanced Energy Industries (NASDAQ: AEIS), First Solar (NASDAQ: FSLR) and SolarCity (NASDAQ: SCTY) saw the largest swings in the number of shares sold short in the first two weeks of March.

Short interest in GT Advanced Technologies, SunEdison and SunPower Holdings increased modestly between the Feb. 28 and March 14 settlement dates. Short sellers shied away from RGS Energy, formerly Real Goods Solar, during the period.

Furthermore, the number of U.S.-listed shares (or ADRs) sold short of foreign-based company Canadian Solar increased by a double-digit percentage, while in China Sunergy, Trina Solar and Yingli Green Energy they grew somewhat. But short interest in Hanwha SolarOne, JA Solar Holdings, JinkoSolar, LDK Solar and ReneSola shrank in the period.

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Here is a quick look at how Advanced Energy Industries, First Solar and Solar City have fared, and what analysts expect from them.

Advanced Energy Industries

After this maker of power conversion products saw short interest retreat more than 11 percent in the previous period, it happened again: down about five percent to around 1.12 million shares by mid-March. That was about three percent of the float. The days to cover was more than two.

One of the company's co-founders announced his retirement from the board of directors in early March. The Colorado-based company has a market capitalization near $1 billion. Its price-to-earnings (P/E) ratio is higher than the industry average, and its return on equity is less than eight percent.

Four of the seven analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares. Their mean price target, where the analysts expect the share price to go, suggests there is more than 10 percent potential upside. But shares traded higher than that in early March.

The share price has fallen more than six percent over the past month, falling below the 50-day moving average. It is still up more than 16 percent year to date. The stock has outperformed competitor MKS Instruments and the broader markets over the past six months.

First Solar

Short interest in this Tempe, Arizona-based company dropped more than 18 percent from a year-to-date peak in the previous period, to around 10.60 million. The number of shares sold short represented more than 14 percent of the float. It would take less than three days to sell out all short positions.

First Solar recently announced the completion of a solar photovoltaic power plant in Japan. The company has a market cap of almost $7 billion. It offers no dividend. While the P/E ratio is less than the industry average, the operating margin is greater than the industry average.

The consensus recommendation of the analysts surveyed 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. One analyst sees 21 percent upside, however.

The share price is more than 36 percent higher than a month ago, most of that gain coming on release of optimistic guidance. Shares reached a new 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.

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Short interest in this provider of solar energy systems to residential and commercial customers jumped more than 16 percent to more than 11.33 million shares. That was more than four times the number of shares short a year ago and represents almost 35 percent of the float. Days to cover was about two.

In March this San Mateo, California-based company announced plans to sell its wares in some Best Buy stores. SolarCity now has a market cap of more than $5 billion, but it does not offer a dividend. Note that both the return on equity and the operating margin are still in the red.

Only four of the 10 polled analysts recommend buying shares, with five of them rating the stock at Hold. A move to the analysts' mean price target would represent a gain of about 20 percent for investors. However, that consensus target is less than the 52-week high reached back in February.

The share price has pulled back more than 25 percent in the past month, falling below the 50-day moving average. But it is still almost 83 percent higher than six months ago. The stock has outperformed the Nasdaq and the S&P 500 in that time, but underperformed smaller competitor RGS Energy.

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


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