Don't Buy This First Solar Bounce
Nothing has changed when it comes to the outlook for First Solar (FSLR) , except for one very minor trading chart milestone: The solar stock fell all the way back to within 2 cents of its five-year ago initial public offering price of $20 this week.
The solar stock isn't just riding the market bullishness on Wednesday higher, but was also one of Tuesday's best performers amid a sea of red in the S&P 500 . On Monday, the shares went as low as $20.05 before closing at $20.19. Tuesday brought an intraday low of $20.02 before the stock surged to finish at $21.38, up 6% for the session.
Meanwhile, solar prices are back in freefall globally, which only adds to the First Solar pressures. The latest signal from long-only institutions has been to give up on the First Solar trade. Baillie Gifford, previously the company's fourth largest shareholder, reduced its First Solar stake to zero in the first quarter.
Even Wall Street, the former home of nothing but love for the solar company, remains loathe to touch the stock, despite the fall to the $20 mark. Only five of 35 analysts covering the stock rate First Solar a buy, according to Bloomberg.
It's impossible to parse the impact of shorts in the First Solar bounce, but shorts are likely part of the action, too, booking some profits since the stock fell all the way to the $20 mark. First Solar has seen a steady increase in short interest in recent weeks, the second largest increase in short interest among alternative energy stocks in recent weeks, according to Nasdaq data.
It's possible the news on Wednesday that Wal-Mart's Walton family, the largest First Solar shareholder, is gaining a seat on the board of the solar company -- though really not much of a surprise -- led some shorts to conclude that it's not wise to wait around and be burned on the day that some big balance sheet buyer like a GE(GE) offers a modest premium for First Solar shares and the Waltons "call it a day" with the solar industry.
It would be a good time to take some profits, too, with every other stock getting clobbered over the past five trading sessions and First Solar receiving the key funding from the Department of Energy for its Antelope Valley project on the deadline for funding last Friday. That funding was the difference between a stock going all the way to the single-digits or bouncing around its recent trading level in the $20s.
It all still leaves investors with the question though: When is it time to get more constructive on First Solar as a long-term buy, as opposed to a trade?