Market Overview

Solar City Leads Rising Short Interest In Solar Stocks (FSLR, RSOL, SCTY)

Solar City Leads Rising Short Interest In Solar Stocks FSLR, RSOL, SCTY

The number of shares sold short in leading U.S. solar-related stocks was on the rise as the new year got under way.

First Solar (NASDAQ: FSLR), Real Goods Solar (NASDAQ: RSOL) and SolarCity (NASDAQ: SCTY) saw the largest upswings.

Short interest in Advanced Energy Industries, GT Advanced Technologies, SunEdison and SunPower Holdings increased more modestly between the December 31 and January 15 settlement dates.

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

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

First Solar

Short interest in this Tempe, Arizona-based company grew more than 18 percent to around 11.92 million shares during the period, the highest level since June of last year. The number of shares sold short represented more than 16 percent of the float. Days to cover was more than two.

Shares of this solar energy company have tumbled since being downgraded by Goldman Sachs early in the month. First Solar has a market cap of about $5 billion. It offers no dividend. The price-to-earnings (P/E) ratio is less than the industry average and lower than the forward earnings multiple.

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 nine percent lower than a month ago, but still up more than 80 percent from a year ago and still above the 200-day moving average. The stock has underperformed Linear Technology and the Nasdaq over the past six months, but also outperformed Sharp.

Real Goods Solar

Short interest in this solar installation services provider rose from about 6.52 million shares in the previous period to more than 7.08 million shares. That represents more than 29 percent of the company's float. Days to cover was a little more than one, down from more than four a month earlier.

The Colorado-based solar energy company completed its acquisition of Mercury Energy during the period and is changing its name to RGS Energy. The company now has a market cap of near $144 million. Note that its return on equity and operating margin are both in negative territory.

Just three analysts have been surveyed, but all of them recommend buying shares. Their mean price target, or where the analysts expect the share price to go, is more than six percent higher than the current share price. But note that shares traded higher than that last week.

The share price has pulled back about nine percent in the past week. However, it is still more than 72 percent higher than six months ago. Over that six months, the stock has outperformed the Nasdaq and the S&P 500, as well as smaller competitor Andalay Solar.

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Short interest in this provider of solar energy systems to residential and commercial customers jumped almost 25 percent to more than 8.05 million shares, taking back most of the decline in the previous period. The number of shares sold short was more than 24 percent of the total float.

In January, this San Mateo, California-based company announced it will open itself up to retail investment this year. SolarCity now has a market cap of about $6 billion, but it does not offer a dividend. Both the return on equity and the operating margin are in the red.

Six of the 11 polled analysts recommend buying shares, with two of them rating the stock at Strong Buy. The current share price has outrun the analysts' mean price target. Until individual targets are raised, upside potential is not indicated.

The share price has pulled back less than two percent from a recent 52-week high. But it is still about 77 percent higher than six months ago. The stock has outperformed not only the Nasdaq and the S&P 500 in that time, but also smaller competitor Real Goods Solar.

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

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