Momentum names
First Solar soared 231.25% over the last year, yet there is a 33% short interest. Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) climbed 216% and has a 37% short interest. And finally, Tesla is up 198% with a 44% short interest. Are these shorts just masochists or is there truly a disconnect between the true believers and the naysayers?
Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) suffered from a perception that Starbucks Corporation (NASDAQ:SBUX) Verismo machine would steal market share. No one was crediting the razor blade model of the K-cups and the popularity of the single-cup brewers. The K-cup patent expiration in 2012 was seen as a profit-killer as if it was a blockbuster drug going generic.
What was good for Starbucks was inevitably bad for Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) but Starbucks Corporation (NASDAQ:SBUX)’ May 10 announcement for an expanded distribution deal with Green Mountain for a minimum five years with new varieties of Starbucks Corporation (NASDAQ:SBUX) flavors for K-cups benefited both. Starbucks hit a 52 week high. New varieties like Starbucks cocoa, Tazo teas, and Seattle’s Best will lure new buyers to the Keurig as well as K-cups.
I have a cousin whom I consider a tell for products gaining wider acceptance. He is comfortable, but not too interested in fads and trends; he skews to the thrifty. When I discovered he was a Netflix, Inc. (NASDAQ:NFLX) streaming fan and then served coffee from a Keurig I knew these companies were mainstream and buyable. Anecdotal evidence may not be acceptable in medicine but sometimes works in the stock market.
Doug Kass, famed Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) bear, has turned if not exactly bullish, more positive, and liked the latest earnings release. He noted, however, that K-cup sales were decelerating and came in under expectations. Still, margins expanded thanks to lower coffee prices, free cash flow was stronger, and concluded he would exit his put position.
Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’s forward P/E now stands at 21.87 and the PEG at 1.24 signaling a slight overvaluation, but this certainly doesn’t merit a 37% short interest. Longs should say all the better for our share price.
The sun shines bright
Although the stock of First Solar, Inc. (NASDAQ:FSLR) is close to 52 week highs the P/E is only at 10.71. The company reported Q1 earnings on May 6 that were significantly less than Q4 2012 mainly due to restructuring charges and expenses to upgrade production. Compared to a loss of $5.20 in Q1 of 2012 a profit of $0.66 EPS looks pretty good and the company reaffirmed very positive guidance for 2013 predicting a stunning 28% rise for profit this year.
First Solar, Inc. (NASDAQ:FSLR) is a global leader in photovoltaic solar systems. Its stock had suffered due to fewer government subsidies going forward especially with big solar adherent Germany pulling away. A surfeit of cheap Chinese solar panels also gutted the market leading to the controversial bankruptcy of Solyndra.
Analyst opinion is tepid with 17 holds, 7 underperforms, 1 sell, and 2 buys. They expect growth to decelerate over the next five years at a 15.65% rate. Morgan Stanley (NYSE:MS) believes, however, with almost 10 million shares for an 11% stake.
Maybe Morgan Stanley (NYSE:MS) believes because the company acquired a new solar cell technology, TetraSun, a Japanese solar company. Its cell-architecture technology is more cost effective and efficient in hot weather applications. At the April 9 analyst meeting CEO Jim Hughes explained how it would be accretive, “This breakthrough technology will unlock the half of the PV market which favors high-efficiency solutions, which has been unserved by First Solar, Inc. (NASDAQ:FSLR) to date.For more on the game-changing technology click here.
Another positive is both First Solar, Inc. (NASDAQ:FSLR) and JX Nippon Oil & Energy, seller of TetraSun, will continue to make the product in Japan which is second only to China as a solar market.
Other glad tidings are increased solar financing initiatives, generous state subsidies, and closing the cost gap between fossil fuel energy generation and solar.
