Could Climate Talks Heat Up These 3 Stocks?

As world leaders tackle climate change, we check in on solar stocks FSLR, SCTY, and SUNE

Dec 1, 2015 at 2:57 PM
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At the World Climate Change Conference 2015 (COP21) in Paris, 150 world leaders are meeting to discuss the problem of climate change and attempt to negotiate global agreements that will limit the effects of warming temperatures in the future. While this is no doubt a daunting task, especially as leaders discuss where funding for worldwide initiatives will come from, clean energy producers are excited to see how any resolutions might play in their favor. Solar energy, in particular, could become more prominent, analysts say, benefiting those companies that are already equipped for production. Let's take a look at how three solar energy interests -- First Solar, Inc. (NASDAQ:FSLR), SolarCity Corp (NASDAQ:SCTY), and Sunedison Inc (NYSE:SUNE) -- are doing, as of today.

FSLR has enjoyed a gain of nearly 30% so far this year, and today has gained 2.3% to sit at $57.78. In late October, First Solar, Inc. reported quarterly earnings that exceeded expectations and forecast impressive full-year numbers. Analysts' outlooks are generally optimistic, though there is still room for upgrades, as five of 16 analysts maintain "hold" or "strong sell" ratings.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FSLR's 50-day call/put volume ratio of 1.77 is higher than 79% of readings taken in the past year -- indicating a stronger-than-usual preference for call buying in recent months. There may be room on the bullish bandwagon, though, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.10 is in the 87th annual percentile, meaning near-term traders have been heavily favoring puts.

While the stock is up 8.6% at $31.24 today, SCTY has not been doing so hot recently. In fact, SolarCity Corp has underperformed the S&P 500 Index (SPX) by nearly 46 percentage points over the last three months, and less than a month ago the shares hit a two-year low of $24.07. The stock is struggling to claw atop the $32 region, following a major earnings miss and subsequent bear gap in late October.

Options traders aren't expecting things to get much better. SCTY's SOIR of 1.1 is higher than more than three-fourths of readings from the past year, pointing to a bigger-than-usual put bias among near-term speculators Likewise, short interest on SCTY hasn't been higher, with 30.2% of the equity's float sold short. Still, 10 of 12 analysts give the stock a "buy" rating or better, meaning downgrades are a good possibility, and could send the shares sinking further.

SUNE has been hemorrhaging since late July, losing almost 90% of its value since hitting an annual high in the summer. Today, Sunedison Inc is up 15.4% -- with help from a TerraForm Power Inc (NASDAQ:TERP) halo lift -- but at $3.68, still sits close to a three-year low of $2.55, touched less than two weeks ago.

Recent liquidity concerns have weighed on SUNE, and more than one-third of the stock's total available float is sold short -- an all-time high. Amazingly, nine of the 14 analysts covering SUNE maintain a "buy" or better rating, compared to just five ratings of "hold" or worse. Options traders have either been looking for some upward momentum or hedging their short positions. The stock's 50-day call/put volume ratio on the ISE, CBOE, and PHLX sits in 91st annual percentile, at 2.96 -- meaning nearly three calls have been purchased for every put over the last 50 days of trading. Considering the stock that has lagged the SPX by more than 75 percentage points over the last three months, a mass exodus of option bulls and/or future downgrades could easily send the shares to even lower lows.

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