Market Overview

Big Short Interest Swings In These 3 Solar Stocks

Big Short Interest Swings In These 3 Solar Stocks

Among the leading U.S. solar-related stocks, First Solar (NASDAQ: FSLR), GT Advanced Technologies (NASDAQ: GTAT) and SolarCity (NASDAQ: SCTY) saw the largest percentage changes in the number of shares sold short in the first two weeks of July.

While short sellers shied away from SunPower (NASDAQ: SPWR) and RGS Energy (NASDAQ: RGSE) between the June 30 and July 15 settlement dates, short interest in Advanced Energy Industries (NASDAQ: AEIS) and SunEdison Holdings (NASDAQ: SUNE) increased somewhat during the period.

Furthermore, the number of U.S.-listed shares (or ADSs) sold short of foreign-based companies Canadian Solar (NASDAQ: CSIQ), Hanwha SolarOne, JA Solar Holdings (NASDAQ: JASO), ReneSola (NYSE: SOL) Rand Yingli Green Energy (NYSE: YGE) grew, but short interest in China Sunergy (NASDAQ: CSUN), JinkoSolar (NYSE: JKS) and Trina Solar (NYSE: TSL) shrank in the period.

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

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First Solar

Short interest in this Tempe, Arizona-based company shrank about 19 percent, taking back most of the gain in the previous period to land on about 9.11 million shares on July 15. The number of shares sold short represents more than 12 percent of the float. The days to cover remained more than three.

First Solar announced in July that it was dropping plans to build the world's largest solar plant in China. The company has a market capitalization of more than $6 billion. Note that the price-to-earnings (P/E) ratio is less than the industry average and the operating margin is greater than the industry average.

The consensus recommendation of the analysts surveyed by Thomson First Call is to hold First Solar shares, though it has more buy recommendations now than two months ago. The mean price target, or where analysts expect the share price to go, is less than three percent higher than current share price.

Short sellers watched shares fall more than 11 percent during the two-week period, but shares now are up more than 10 percent year to date. 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.

GT Advanced Technologies

This Nashua, New Hampshire-based company saw short interest grow more than 12 percent in the first weeks of the month to about 46.38 million shares. That was the second highest number of shares sold short so far this year. Days to cover was to about three. Short interest is more than 34 percent of the float.

During the period, speculation grew that this crystal growth equipment provider for the solar and electronics industries might be dropped as an iPhone 6 component maker. The company has a market cap of around $2 billion. The long-term earnings per share (EPS) growth forecast is almost 48 percent.

Of the 11 analysts surveyed, six of them recommend buying shares, but that is fewer Buy ratings than a month ago. The mean price target suggests that there is more than 25 percent potential upside. However, shares traded higher than that as recently as the beginning of July.

Shares pulled back about 18 percent during the two-week period, falling below the 50-day moving average. The share price now is up about 64 percent year to date. The stock has outperformed larger competitor Applied Materials and the broader markets over the past six months.

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After this solar energy systems designer, installer and lessor saw short interest climb in the previous four periods, it retreated about 23 percent in early July. That almost 10.99 million shares was about 23 percent of the total float. It would take more than two days to cover all short positions.

SolarCity recently moved into manufacturing with the acquisition of solar panel maker Silevo. SolarCity has a market capitalization of more than $6 million. Note that both the operating margin and the return on equity are in negative territory. It is expected to post net losses for both this year and the next.

Of the 11 analysts who follow the stock, nine recommend buying shares, with three of them rating the stock at Strong Buy. While a move to their mean price target would be a gain of almost 14 percent for the shares, that consensus target is less than the 52-week high from early this year.

The share price ended the two-week short interest period more than seven percent lower, though it has climbed more than 10 percent since. The 50-day and 200-day moving averages appear to be headed for a golden cross. The stock has outperformed competitor RSG Energy but underperformed the broader markets over the past six months.

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

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