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Short Sellers Pounce on Real Goods Solar (FSLR, RSOL, SCTY)

June 15, 2013 8:08 am
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Short Sellers Pounce on Real Goods Solar (FSLR, RSOL, SCTY)

Among U.S. solar-related stocks, Real Goods Solar (NASDAQ: RSOL) and SolarCity (NASDAQ: SCTY) saw the largest upswings in short interest between the May 15 and May 31 settlement dates.

GT Advanced Technologies (NASDAQ: GTAT) and MEMC Electronic Materials — now known as SunEdison (NYSE: SUNE) — also saw short interest in their shares grow somewhat.

However, short interest in Suntech Power Holdings (NYSE: STP), (which is in bankruptcy) was essentially flat during that time.

The number of shares sold short in Advanced Energy Industries (NASDAQ: AEIS) and SunPower Holdings (NASDAQ: SPWR) decreased in the final weeks of May, but the largest drop in short interest happened to First Solar (NASDAQ: FSLR).

Furthermore, the number of U.S.-listed shares (or ADRs) sold short of foreign companies Canadian Solar (NASDAQ: CSIQ), JA Solar Holdings (NASDAQ: JASO) and Yingli Green Energy (NYSE: YGE) grew in late May, while short interest in China Sunergy (NASDAQ: CSUN), LDK Solar (NYSE: LDK), ReneSola (NYSE: SOL) and Trina Solar (NYSE: TSL) shrank.

Here is a quick look at how First Solar, Real Goods Solar and SolarCity have fared and what analysts expect from them.

First Solar

Short interest in this solar energy company fell almost 16 percent to around 15.39 million shares during the period. That was the smallest number of shares sold short in at least a year, but it still represents more than 25 percent of the float. Days to cover declined slightly to about two.

In May, this Tempe, Arizona-based company was reported to be looking for a partner in India. First Solar has a market capitalization of about $4 billion. It offers no dividend. The price-to-earnings (P/E) ratio is lower than the industry average, and the operating margin is higher than the industry average.

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. Note though that the street-high price target is almost 30 percent higher than the share price.

The share price dropped almost 16 percent in the past week, but it is still more than 43 percent year-to-date. Over the past six months, the stock has outperformed the likes of Linear Technology (NASDAQ: LLTC) and Sharp, as well as the broader markets.

Real Goods Solar

Short interest in this solar installation services provider surged from about 94,000 shares on May 15 to more than 1.14 million shares by the end of the month. That was by far the highest number of shares sold short in the past year, and it represents more than eight percent of the company's float.

The Colorado-based solar energy company announced in May that it would sell shares in a private placement, raising an estimated $9.25 million. The company now has a market cap of near $78 million. Note that its return on equity and operating margin are both in negative territory.

Though the consensus recommendation had been to hold shares, no analysts have been surveyed by Thomson/First Call recently. That also means there is no current mean price target. Given the stock's recent volatility, a consensus price target might mean little anyway.

The share price spiked more than 247 percent to a multiyear high in mid-May, but it quickly retreated. However, it is still more than 241 percent higher year-to-date. So, of course the stock has outperformed the Nasdaq and the S&P 500 over the past six months, as well as SolarCity.


Short interest in this provider of solar energy systems to residential and commercial customers increased almost 25 percent to 4.17 million shares. The number of shares sold short was more than 17 percent of the float, and the greatest since SolarCity began trading publicly in mid-December.

The San Mateo, California-based company announced a financing deal with Goldman Sachs (NYSE: GS) in mid-May. SolarCity now has a market cap of more than $2 billion, but it does not offer a dividend. The long-term earnings per share (EPS) growth forecast is about 33 percent.

Just one of the six surveyed analysts recommends buying shares, while the rest recommend holding them. Here too, the current share price is higher than the analysts' mean price target. Though the highest individual price target represents potential upside of about seven percent, it too is much less than the recent post-IPO high.

The share price is up about 176 percent year-to-date, despite pulling back more than 34 percent from that high in May. Over the past three months, the stock has outperformed the Nasdaq and the S&P 500, but as mentioned above it underperformed competitor Renesola.

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