Market Overview

3 Solar Stocks With Surging Short Interest

3 Solar Stocks With Surging Short Interest

Among the leading U.S. solar-related stocks, Advanced Energy Industries (NASDAQ: AEIS), First Solar (NASDAQ: FSLR) and SunPower (NASDAQ: SPWR) saw the largest percentage increases in the number of shares sold short in the first two weeks of June.

Short sellers shied away from SunEdison between the May 30 and June 13 settlement dates. Short interest in GT Advanced Technologies and SolarCity also increased during the period; short interest in RGS Energy was about the same as in the previous period.

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

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

Advanced Energy Industries

This maker of power conversion products saw short interest climb in the past six quarters. In early June, it increased about nine percent to around 1.87 million shares. That was more than four percent of the total float. It would take more than two days to cover all short positions.

Shares plunged at the beginning of the month on news of the chief executive's retirement. The Colorado-based company has a market capitalization near $765 million. Its price-to-earnings (P/E) ratio is lower than the industry average, and its operating margin is greater than the industry average.

Only three of the seven analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares, but all three rate it at Strong Buy. Their mean price target, where the analysts expect the share price to go, suggests there is about 20 percent potential upside.

The share price ended the two-week short interest period more than five percent lower. As of Wednesday's close, it is down around 17 percent year-to-date and below the 50-day moving average. The stock has underperformed competitor MKS Instruments and the broader markets over the past six months.

First Solar

Short interest in this Tempe, Arizona-based company grew more than 11 percent. This reclaimed and exceeded a smaller drop from the previous period to land on 9.07 million on June 13. The number of shares sold short represents more than 12 percent of the float. The days to cover was still about three.

First Solar made an acquisition in June, and tariffs were imposed on Chinese competitors. The company has a market cap of about $7 billion. It offers no dividend. Note that the return on equity is less than 10 percent, but the operating margin is in line with the industry average.

The consensus recommendation of the polled analysts is to hold First Solar shares, but it has more buy recommendations now than two months ago. The current share price is higher than the analysts' mean price target, meaning they see no upside potential at this time. One analyst sees 19 percent upside, however.

The share price rose more than four percent during the period, and now it is up more than 19 percent, relative to the beginning of the year. The stock has outperformed not only the likes of Linear Technology and Sharp over the past six months, but the Nasdaq and the S&P 500 as well.

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SunPower Holdings

Shares sold short in this integrated solar products and services company posted a gain of about seven percent in early June to more than 11.93 million. That was up from a year-to-date low in the previous period and came to more than 21 percent of the float. The days to cover slipped to about four from a little more than five.

Headquartered in San Jose, California, this company has a market cap of more than $5 billion. Like First Solar, it is expected to benefit from tariffs on Chinese competitors. SunPower has a long-term earnings per share (EPS) growth forecast of about 30 percent, and its return on equity is more than 20 percent.

The consensus recommendation of the 16 analysts surveyed is to hold shares, though it has seven buy recommendations and no Underperform ratings. And note that the current share price has outstripped the mean price target, suggesting that there is no upside potential at this time.

Short sellers watched shares increase about seven percent in the first weeks of June. The share price reached a new multiyear high this week. The stock has outperformed competitor First Solar, as well as the S&P 500 and the Nasdaq, over the past six months.

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

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