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Sharp Drop In Short Interest For SolarEdge, SunEdison

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Sharp Drop In Short Interest For SolarEdge, SunEdison

The surge in short interest among the leading U.S. solar-related stocks in early May became gave way to more mixed movement in the final two weeks of the month.

Some of the wildest swings in the level of short interest between the May 15 and May 29 settlement dates happened to Advanced Energy Industries, Inc. (NASDAQ: AEIS), Solaredge Technologies Inc (NASDAQ: SEDG) and Sunedison Inc (NYSE: SUNE).

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: Lemelson Doubles Short Position In Ligand Pharmaceuticals, Says It's Created 'Pyramid Scheme Of Shell Companies'

Advanced Energy Industries

As the month came to a close, the number of shares short in this maker of power conversion products rose more than 10 percent to around 1.09 million. That was a little less than 3 percent of the total float, and the first time since March that the figure topped a million. Days to cover was about four.

During the period, shares of Advanced Energy Industries rose to a series of new 52-week highs. The Colorado-based company has a market capitalization is more than $1 billion. Its operating margin is higher than the industry average, but year-on-year revenue declines are forecast for this quarter and this year.

Six of the eight analysts who follow the stock and were surveyed by Thomson First Call recommend buying shares, with four of them rating it at Strong Buy. But the share price has overrun their mean price target, so no further upside potential is indicated at this time.

The share price ended the two-week short interest period up almost 6 percent, and the 50-day and 200-day moving averages formed a golden cross in that time. The stock has outperformed the broader markets while rising more than 30 percent over the past six months.

SolarEdge Technologies

Short interest in this maker of PV solar panel components retreated from almost 247,000 on the previous settlement date to more than 221,000 by the end of May. That was the second largest number of shares short since its initial public offering, and it was about 2 percent of the total float.

SolarEdge has teamed with Tesla on the latter's Powerwall home battery system. SolarEdge held its initial public offering back in March and now has a market cap of around $1.5 billion. Its price-to-earnings (P/E) ratio is sky-high, and its return on equity is in negative territory.

All of the six analysts surveyed recommend buying SolarEdge shares, with two of them rating the stock at Strong Buy. But note that the mean price target, or where analysts expect the share price to go, is only marginally higher than the current share price.

Short sellers watched the stock rise almost 10 percent during the two-week period, but only a little more since that time. Since its IPO, SolarEdge shares have outperformed not only the two other stocks featured here, but the Nasdaq and the S&P 500 as well.

SunEdison

The number of shares sold short reached a year-to-date high of almost 82.56 million in two-week period. That is more than 24 percent of the total float. As the average daily volume surged to a year-to-date high too, the days to cover dropped from around 11 to less than seven.

One of the world's largest solar installers and developers, SunEdison announced projects in southern California and on Long Island during the period. The company has a market cap of around $8 billion. Note that both the operating margin and the return on equity are in the red.

All but one of the 14 polled analysts recommend buying shares, with five of them rating the stock at Strong Buy. Their mean price target indicates they see more than 13 percent potential upside. Note that the shares have not traded at that level since back in 2008.

The share price ended the period more than 8 percent higher, but it has given up most of that gain since. The stock is still up about 51 percent year to date. Over the past six months, it outperformed the likes of Advanced Energy Industries and Analog Devices, as well as the broader markets.

See also: This Mega-Hedge Fund Manager Is Short Sketchers

And Others

Real Goods Solar also saw a double-digit percentage increase in the number of its shares short during the period, while short interest growth was more modest in First Solar, SunPower and TerraForm Power.

Short sellers shied away from SolarCity and Vivint Solar in the final two weeks of the month.

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

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

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