Short interest in many leading solar stocks grew in the most recent period.
Sunedison Inc (NYSE: SUNE), TerraForm Power Inc. (Nasdaq:TERP) and Sunrun Inc. (Nasdaq: RUN) saw sharp increases in short interest in late November.
Short sellers lost interest in just a few solar stocks late in the month.
With share prices of many of the leading U.S. solar-related stocks drifting lower since Sunedison announced back in July that it would acquire Vivint Solar, it should be little surprise that short sellers are increasingly attracted to the industry.
Between the November 13 and November 30 settlement dates, the number of shares short in Sunedison, along with Sunedison's yieldco TerraForm Power, and Sunrun grew sharply.
Here 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 mo
ves in other leading solar stocks during the period.
The number of shares sold short jumped more than 29 percent and reached a year-to-date high of around 119.30 million by the end of two-week period. That is about 38 percent of the float. The average daily volume surged to a year-to-date high too, and the days to cover was a bit more than one.
One of the world's largest solar installers and developers, Sunedison signed a deal with L.A. County during the period. Sunedison currently has a market capitalization of more than $1 billion. Note that both the return on equity and the operating margin are in negative territory.
All but four of the 16 analysts surveyed by Thomson/First Call recommend buying Sunedison shares, with four of them rating the stock at Strong Buy. The analysts' mean price target suggests the see more than 72 percent upside potential.
The share price ended the two-week period about 29 percent lower, despite being up almost 14 percent at one point. It is now down more than 78 percent year-to-date. Over the past six months, the stock underperformed Terraform Power and the broader markets.
Short interest in this company saw a gain of about 49 percent to more than 5.21 million shares. That was the highest number of shares short since last year's IPO, as well as around 10 percent of the float. At the current average daily volume, it would take more than nine days to cover all short positions.
This purveyor of solar energy systems posted a smaller-than-expected net loss just before mid-month. It has a market capitalization of more than $1 billion. Here too, both the operating margin and the return on equity are in the red.
All but one of the six analysts polled recommended buying shares of Sunrun. They see plenty of room for shares to run, as their mean price target is more than 48 percent higher than the current share price.
Short sellers watched the share price rise more than 17 percent, but then end the two-week short interest period about where it began. The Nasdaq was down about 1 percent in that time. Over the past six months, the stock has outperformed the others featured here.
Short interest in this owner and operator of solar and wind generation assets surged more than 121 percent to more than 14.81 million shares. That was nearly 22 percent of the float, and by far the greatest number of shares short year-to-date. The days to cover remains less than two.
Fund manager David Tepper was critical of Sunedison merger. TerraForm has a market cap of less than $2 billion and a dividend yield of about 12.8 percent. The long-term EPS growth forecast is more than 25 percent, yet the return on equity is in the red.
Seven of the 11 surveyed analysts recommended buying shares, with three of them rating the stock at Strong Buy. A move to the analysts' mean price target would be a more than 45 percent gain for the shares.
Short sellers watched the share price tumble more than 47 percent during the two-week period, though it has roared back more than that in the past week. The stock underperformed the Nasdaq and the S&P 500 over the past six months, but outperformed parent Sunedison in that time.
Gains in the number of 8point3 Energy Partners, Real Goods Solar, SolarCity, SunPower and Vivint Solar shares were relatively more modest, increasing between about 9 percent and 19 percent during the final two weeks of the month.
However, Advanced Energy Industries, First Solar and SolarEdge Technologies bucked the trend, as short sellers retreated in late November.
Among foreign-based solar companies, the number of U.S.-listed shares (or ADSs) sold short in Canadian Solar, China Sunergy and JinkoSolar increased during the period. But short interest in Hanwha Q CELLS, JA Solar Holdings, ReneSola, Trina Solar and Yingli Green Energy shrank.
At the time of this writing, the author had no position in the mentioned equities.