Market Overview

First Solar, Vivint Solar Lead Short Interest Trend

First Solar, Vivint Solar Lead Short Interest Trend
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By and large, short sellers loaded up on the leading U.S. solar-related stocks between the February 13 and February 27 settlement dates.

Leading that short interest trend were First Solar, Inc. (NASDAQ: FSLR), TerraForm Power Inc (NASDAQ: TERP) and Vivint Solar Inc (NYSE: VSLR).

Below is a quick look at how these three stocks have fared recently and what analysts expect from them. That is followed by a glance at short interest moves in other leading solar stocks.

See also: The 10 Most Shorted Small-Cap Tech Stocks

First Solar

Short interest in this Tempe, Arizona-based company grew more than 15 percent during the period to more than 9.27 million shares, or less than 13 percent of the float. That was the greatest number of shares short since last August. It would take less than two days to cover all short positions.

During the period, First Solar announced its intention to form a yieldco with SunPower. First Solar has a market capitalization of almost $6 billion. Its operating margin is better than the industry average and its price-to-earnings (P/E) ratio is less than the industry average.

The consensus recommendation of the analysts polled by Thomson/First Call is to hold shares, and that has been the case for at least three months. Yet, the analysts' mean price target, or where they expect the share price to go, is about 6 percent higher than the current share price.

The share price jumped more than 22 percent during the short interest period, and now it is around 33 percent higher year to date. Although the stock underperformed Linear Technology and the broader markets over the past six months, it also outperformed Sharp in that time.

TerraForm Power

Short interest in this owner and operator of solar and wind generation assets rose more than 11 percent to more than 5.03 million shares. That was more than 11 percent of the float, and the greatest number of shares short since its initial public offering last summer. The days to cover dropped to less than five.

This subsidiary of SunEdison had a stellar earnings forecast for the coming year. TerraForm has a market cap of less than $2 billion and a dividend yield of about 3.2 percent. Note that the return on equity is in the red, though.

All but one of the six surveyed analysts recommended buying shares, with two of them rating the stock at Strong Buy. A move to the analysts' mean price target would be a more than 11 percent gain for the shares. That consensus target would be a new post-IPO high as well.

Short sellers watched the share price rise more than 9 percent during the two-week period, though it has been essentially flat since the settlement date. The stock outperformed not only the Nasdaq and the S&P 500 over the past six months, but parent SunEdison as well.

Vivint Solar

The number of shares sold short in this company jumped about 27 percent in the period to more than 3.65 million, or almost 18 percent of the float. That is the greatest number of shares short since Vivint came public last fall. It would take more than six days to close out all of the short positions.

This Provo, Utah-based provider of residential solar energy systems posted better-than-expected earnings for the fourth quarter. Vivint has a market cap of more than $1 billion. The return on equity is in negative territory. Analysts anticipate net losses in the current quarter, as well as for the full year and next year.

All but one of the five analysts polled recommend buying Vivint shares, with one of them rating the stock at Strong Buy. They see lots of room for shares to run, as their mean price target indicates more than 41 percent potential upside. That consensus target would be a post-IPO high as well.

The share price fell almost 4 percent during the period. However, it has surged about 44 percent since then, rising well about the 50-day moving average. Since the IPO in October, the stock has underperformed the other two stocks featured here, as well as the S&P 500 and the Nasdaq.

See also: Apple Short Activity Up 11% Since March 1

And Others

RGSE Energy, SolarCity and SunEdison also saw rising short interest. However, short sellers retreated from Advanced Energy Industries and SunPower in the final two weeks of the month.

Among foreign-based solar companies, the number of U.S.-listed shares (or ADSs) sold short of China Sunergy, JA Solar Holdings, JinkoSolar and Trina Solar shrank during the period. However, Canadian Solar, Hanwha Q CELLS, ReneSola and Yingli Green Energy saw gains in their short interest.

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

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