SunEdison Leads Short Interest Trend In Solar Stocks

• Short interest in many of the leading solar stocks shrank in the most recent period.
• Two solar companies in particular led that trend in late January.
• Analysts on average recommend buying shares of both of them.

While short sellers shied away from many of the leading solar stocks between the January 15 and January 29 settlement dates, two companies in particular led that trend. The number of Advanced Energy Industries, Inc. AEIS and Sunedison Inc SUNE shares sold short shrank by more than 10 percent by the end of the month.

Also in the period, 8point3 Energy Partners, First Solar, SolarEdge Technologies, Sunrun and TerraForm Power saw declines in their short interest. Yet, in SolarCity, SolarEdge and SunPower, the number of shares short was essentially the same at the beginning and end of the two-week period. Real Goods Solar saw a very modest rise in short interest between the settlement dates.

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

Here we take a quick look at how Advanced Energy Industries and SunEdison have fared recently, and what analysts expect from them.

Advanced Energy Industries

This maker of power conversion and control products saw its short interest pull back around 13 percent to nearly 1.02 million shares, or 2.5 percent of float, in the final weeks of the month. Note that it was the fifth straight period of shrinking short interest. It would take more than three days to cover all short positions.

The settlement period ended before Advanced Energy Industries posted better-than-expected fourth-quarter results. The consensus analyst recommendation now is to buy the shares, and a move to their mean price target would be a gain of more than 18 percent for those shares.

Short sellers watched the shares rise about 6 percent during the two-week short interest period, compared to a gain of less than 2 percent in the Nasdaq. Shares have plateaued since, but note that the Nasdaq has retreated more than 6 percent in that time.

SunEdison

The number of shares sold short in this Missouri-based renewable energy development company retreated more than 10 percent during the two weeks to around 93.60 million. Though that was a whopping 29.8 percent of the total float, it also was lowest level of short interest since last November. The days to cover rose to more than three.

In the period, SunEdison applauded California's decision to extend net metering for the state's solar customers. The consensus analyst recommendation is to buy SunEdison shares. Note that their mean price target suggests that they now see nearly 89 percent upside potential.

During the settlement period, shares tumbled more than 26 percent, only to bounce back and end the two weeks up more than 11 percent. The S&P 500 gained about 2 percent in that time. However, in the past week, the stock has plunged again, nearly 45 percent, to a new 52-week low.

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