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Short Sellers Continue to Move into Solar Stocks

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May 12, 2013 2:14 pm
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Short Sellers Continue to Move into Solar Stocks

By and large, short sellers continued to move into U.S. solar-related stocks during the final two weeks of April, though short interest fell in Chinese solar stocks.

Advanced Energy Industries (NASDAQ: AEIS), GT Advanced Technologies (NASDAQ: GTAT),MEMC Electronic Materials (NYSE: WFR), SolarCity (NASDAQ: SCTY) and SunPower Holdings (NASDAQ: SPWR) all saw short interest in their shares grow between the April 15 and April 30 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 First Solar (NASDAQ: FSLR) decreased.

Also, U.S.-listed shares (or ADRs) sold short of foreign companies Canadian Solar (NASDAQ: CSIQ) and ReneSola (NYSE: SOL) increased in early April as well, while short interest in Trina Solar (NYSE: TSL) and Yingli Green Energy (NYSE: YGE) fell somewhat.

But China Sunergy (NASDAQ: CSUN), JA Solar Holdings (NASDAQ: JASO) and LDK Solar (NYSE: LDK) saw their short interest decline more substantially in that time.

The biggest percentage increases in short interest in the stocks of U.S. solar companies between the April 15 and April 30 settlement dates happened to Advanced Energy Industries, GT Advanced Technologies and MEMC Electronic Materials.

Advanced Energy Industries

This maker of power conversion products saw short interest grow more than 13 percent in late April to 1.23 million shares. That was the highest number of shares sold short since mid-January, and it represented more than three percent of the float. Days to cover fell to less than three.

The expected costs Advanced Energy announced to integrate its recent acquisition of REFUsol may have caught the eye of short sellers. The company’s market capitalization is about $690 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 as well.

Only three of the eight analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares, while two of them rate it at Underperform. But the mean price target, which is where the analysts expect the share price to go, is more than five percent higher than the current share price.

The share price has retreated more than 10 percent from the multiyear high reached in March. Still, the stock has outperformed competitor MKS Instruments (NASDAQ: MKSI) and the broader markets over the past six months.

GT Advanced Technologies

This Nashua, New Hampshire-based company saw short interest grow about eight percent in late April to 41.33 million shares. That was the highest number of shares sold short in at least a year, though days to cover fell to less than nine. Short interest was about 35 percent of the float.

The crystal growth equipment provider for the solar and electronics industries posted a smaller-than-expected loss but missed revenue estimates in its most recent quarterly report. The company has a market capitalization of about $460 million. The long-term EPS growth forecast is about 10 percent, and the forward earnings multiple is less than the industry average P/E ratio.

All but two of the 13 surveyed analysts recommend holding shares, and that has been the consensus recommendation for the past three months. The mean price target is only marginally higher than the current share price, indicating that analysts on average see little potential upside at this time.

The share price is up more than 17 percent year-to-date, though shares did reach a multiyear low back in March. The stock has underperformed larger competitor Applied Materials (NASDAQ: AMAT) and the broader markets over the past six months.

MEMC Electronic Materials

The number of shares sold short in this silicon wafer and solar energy services provider increased about eight percent in the period to about 16.87 million. That was the highest level of short interest since mid-January, and it represented more than seven percent of the float. Days to cover was about three.

Headquartered near St. Louis, this company has a market cap of more than $1 billion. In April, its SunEdison unit struck a deal with Toshiba to build solar-power stations in Japan. While MEMC has a long-term EPS growth forecast of more than 12 percent, its return on equity is in the red and the operating margin is less than the industry average.

Half of 18 analysts surveyed recommend buying shares, with three of them rating the stock at Strong Buy. Their mean price target suggests more than 13 percent upside potential relative to the current share price. That target is a level that shares have not seen since October 2011.

The share price is up more than 57 percent year-to-date, and about 146 percent higher than six months ago. Over that six months, the stock has outperformed the likes of Advanced Energy Industries and Analog Devices (NASDAQ: ADI), as well as the Dow Jones Industrial Average.


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