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Have Short Sellers Given Up On Solar Stocks?

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April 11, 2015 7:43 pm
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Have Short Sellers Given Up On Solar Stocks?

Short sellers shied away again from many of the leading U.S. solar-related stocks between the March 13 and March 31 settlement dates. The most significant downswings in short interest in the period happened to First Solar, Inc. (NYSE: FSLR), Real Goods Solar, Inc. (NASDAQ: RGSE) and SunPower Corporation (NASDAQ: SPWR).

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: Some Think SunEdison Is Planning To Buy Evolve Solar To Get Closer To The Residential Market

First Solar

Short interest in this Tempe, Arizona-based company shrank about 10 percent during the period to more than 7.98 million shares, or about 11 percent of the float. That was the greatest number of shares short in at least a year. At the average daily volume, it would take less than four days to cover all short positions.

Shares have plateaued since the rally following news of First Solar’s yieldco with SunPower. First Solar has a market capitalization of about $6.2 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 5 percent higher than the current share price.

The share price ended the short interest period marginally lower, and now it is more than 37 percent higher year to date. Although the stock narrowly underperformed the Nasdaq and competitor/partner SunPower over the past six months, but it also outperformed the S&P 500 in that time.

Real Goods Solar

Short interest in this company, now known as RGS Energy, fell more than 23 percent to around 3.14 million shares during the period. That was the smallest level of short interest in the past year, and it represents more than 6 percent of the float. The days to cover is less than one.

Shares of this Colorado-based solar energy company have declined in the past year and now trade for less than a dollar. It has a market cap of only about $18 million. Its operating margin and its return on equity both remain in the red, but double-digit percentage revenue growth is forecast for the current year.

Only one polled analyst remains, that that analyst recommends holding the shares. For what it is worth, the one remaining price target is more than 71 percent higher than the current share price, though it is well south of the 52-week high from almost a year ago.

Shares were relatively flat during the short interest period, but they fell to a new 52-week low this past week. They have been mostly below the 50-day moving average since last summer. Over the past six months, the stock has underperformed the other two stocks featured here, as well as the Nasdaq.

See also: TerraForm Power Acquires 168 MW of Solar Power Plants From SunEdison

SunPower

The number of shares sold short in this integrated solar products and services company shrank about 19 percent in late March to more than 5.89 million. That was the lowest level of short interest in the past year and totaled more than 11 percent of the float. The days to cover rose to more than four.

Headquartered in San Jose, California, this company has a market cap of more than $4 billion. It announced in March that it would form a yieldco with First Solar. SunPower has a return on equity of more than 18 percent, and its operating margin is greater than the industry average.

The consensus recommendation of the 13 analysts surveyed is to buy shares, with three of them rating the stock at Strong Buy. A move to their mean price target would represent a 20 percent gain on the current share price. Note though that the consensus target is less than the 52-week high.

Short sellers watched shares rise a bit but then drift lower in the latter weeks of March. The share price has bounced back more than 3 percent since. The stock’s performance has been nearly in line with that of competitor/partner First Solar over the past six months, and they both outperformed the S&P 500.

And Others

Short sellers also retreated more modestly from SolarCity, TerraForm Power and Vivint Solar, in the latter two weeks of the month, and short interest in SunEdison was essentially unchanged from the previous settlement date. However, Advanced Energy Industries saw a marginal bump in short interest.

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