Sizing Up 3 Solar Stocks Ahead of Nevada's Public Utility Decision

Sunedison Inc (NYSE:SUNE), SolarCity Corp (NASDAQ:SCTY), and First Solar, Inc. (NASDAQ:FSLR) are getting burned by a draft order at the Nevada Public Utilities Commission

Dec 22, 2015 at 11:27 AM
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Just a few days after catching fire, solar stocks are cooling off on a draft order to be considered this morning at the Nevada Public Utilities Commission (PUC), which would reduce customer credits for selling power back to the grid. Among the names getting hammered at midday are Sunedison Inc (NYSE:SUNE), SolarCity Corp (NASDAQ:SCTY), and First Solar, Inc. (NASDAQ:FSLR).

SUNE has lost a mind-bending 27.5% at $4.88 due to the aforementioned development. Adding insult to injury, Appaloosa Management LP said it wants to inspect the books of "yieldco" TerraForm Power Inc (NASDAQ:TERP) to gather information on the nature of its dealings with parent company Sunedison.

Today's sharp losses are par for the course when it comes to this solar stock. Sunedison Inc has surrendered over three-quarters of its value year-to-date. In the options pits, short sellers have been upping the bearish ante, with short interest spiking nearly 30% during the latest reporting period -- and now accounting for almost 44% of SUNE's total float.

Meanwhile, SCTY is down 5.6% at $52.03, putting it back in negative year-to-date territory. Likely weighing heavily on the Street's collective mind are comments from CEO Lyndon Rive, who said the firm will cease sales and installation operations in Nevada if the PUC approves the aforementioned proposal.

On the sentiment front, the brokerage crowd is extremely bullish toward SolarCity Corp. Eleven of 13 analysts rate the stock a "buy" or better, with not a single "sell" recommendation to be found. Just this morning, SCTY also received a pair of price-target hikes -- at Credit Suisse (to $124) and Raymond James (to $75). Suffice it to say, if today's struggles continue into the future, these optimists may be forced to abandon their hopes for the stock -- which could trigger additional selling pressure.

Finally, FSLR has slipped 2.6% to trade at $64.02, but remains over 13% higher on the month. What's more, the stock continues to find a foothold around $64, which corresponds with the upper end of its Dec. 16 bullish gap.

Unlike the two prior names, First Solar, Inc.'s prospects are sound, especially from a contrarian perspective. Beyond sporting strong technicals of late, the stock's short-interest ratio rests at 4.20, representing over four sessons' worth of pent-up buying demand, at typical volumes. In other words, there's plenty of sideline cash available to fuel a short-covering rally.


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