Short Interest in Solar Stocks Explodes In May

The overall dwindling short interest in the leading U.S. solar-related stocks came to end in the first two weeks of May.

Short sellers especially piled back into Solaredge Technologies Inc SEDG, SunPower Corporation SPWR and Vivint Solar Inc VSLR between the April 30 and May 15 settlement dates.

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.

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SolarEdge Technologies

Short interest in this maker of PV solar panel components jumped from less than 14,000 on the previous settlement date to almost 247,000 by mid-May. That was the largest number of shares short since its initial public offering earlier this year, and it was more than 2 percent of the total float.

Goldman Sachs recently pointed to potential it sees in solar "laggards" such as SolarEdge Technologies. The company held its initial public offering back in March and now has a market cap of more than $1 billion. Its operating margin is in the red and the return on equity is less than 3 percent.

All of the six analysts who follow the stock and were surveyed by Thomson/First Call recommend buying 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 nearly 32 percent during the short-interest period, with most of that gain coming after the most recent earnings report. Since its IPO, SolarEdge shares have outperformed not only the two other stocks featured here, but the broader markets as well.

SunPower

Shares sold short in this integrated solar products and services company posted a gain of more than 25 percent in the period to more than 6.78 million. That was up from a year-to-date low in the previous period and came to more than 12 percent of the float. The days to cover was more than four.

Headquartered in San Jose, California, this company has a market cap of around $4 billion. SunPower and First Solar are forming a yieldco to be called 8point3 Energy Partners. SunPower has a return on equity of about 12 percent and the operating margin is better than the industry average.

The consensus recommendation of the 13 analysts surveyed is to buy SunPower shares, and it has been for at least three months. A move to the analysts' mean price target would be a gain of more than 25 percent for the shares. Note that the stock last traded in that neighborhood last summer.

Shares retreated about 4 percent in the first two weeks of May, while the S&P 500 was essentially flat in that time. The stock has dropped another 2 percent since then. However, SunPower has outperformed competitor First Solar, as well as the S&P 500 and the Nasdaq, over the past six months.

Vivint Solar

The number of shares sold short in this Utah-based company increased more than 25 percent to around 4.56 million, or more than 22 percent of the float. That ended three periods in a row of declining short interest. It would take less than four days to close out all of the short positions.

The company posted disappointing first-quarter results during the period. Its market cap is around $1.5 billion, and the return on equity is in negative territory. Analysts anticipate a net loss in the current quarter, as well as for the full year and next year. Revenue for the year is so far estimated at about $60 million.

All but one of the six analysts polled recommend buying Vivint shares, with two of them rate the stock at Strong Buy. They see plenty of room for shares to run, as their mean price target indicates more than 27 percent potential upside. That consensus target would be a post-IPO high as well.

The share price ended the two-week period only a little more than 1 percent lower than where it began. But the 50-day and 200-day moving averages formed a golden cross in that time. Over the past six months, the stock has handily outperformed First Solar, as well as the S&P 500 and the Nasdaq.

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And Others

Advanced Energy Industries, Inc. AEIS and TerraForm Power Inc TERP also saw double-digit percentage increases in the number of their shares short during the period, while short-interest growth was more modest in SolarCity Corp SCTY and Sunedison Inc SUNE.

However, First Solar, Inc. FSLR and Real Goods Solar, Inc. RGSE bucked the trend as short sellers shied away in the first two weeks of the month.

Among foreign-based solar companies, the number of U.S.-listed shares (or ADSs) sold short in Canadian Solar Inc. CSIQ, ReneSola Ltd. (ADR) SOL and Yingli Green Energy Hold. Co. Ltd. (ADR) YGE also swelled during the period. However, China Sunergy Co Ltd CSUN, Hanwha Q Cells Co Ltd-ADR HQCL, JA Solar Holdings Co., Ltd. (ADR) JASO, JinkoSolar Holding Co., Ltd. JKS and Trina Solar Limited (ADR) TSL 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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