Why Are These Solar Stocks on the Move?

Sunedison Inc (NYSE:SUNE) has declined by 4.44% after hedge fund manager David Tepper of Appaloosa Management denied building a stake in the solar stock on Friday. Tepper is famous for being a contrarian, having bought Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) equity securities at the depths of the financial crisis and making billions of dollars in profits on them when the prices of the securities rebounded. To many investors, Sunedison is in a similar situation to the financial stocks six years ago, as shares of the solar stock are down more than 75% from its highs, but still present solid value.  David Einhorn of Greenlight Capital, which owned 24.84 million at the end of June, thinks SunEdison has good long-term potential since it obtains an average return on capital of 10% in developed markets and 13% in emerging markets by selling solar and wind projects to “highly creditworthy counterparties”. Einhorn thinks Sunedison can earn $1.34 per share next year, assuming that TerraForm Power and Terraform Global “do not regain access to the capital markets”.

In a reversal from yesterday’s rally, SunPower Corporation (NASDAQ:SPWR) fell by 2.0% in morning trading on the back of SolarCity’s poor outlook. Because SunPower makes high efficiency rooftop solar panels that solar panel installers use, SunPower Corporation’s actual results could be softer than expected if solar panel installers such as SolarCity have a weaker outlook. Because solar stocks tend to move quickly one way or the other, it doesn’t take much to move SunPower stock up or down, although the long term fundamentals of SunPower is secure if it can maintain its efficiency lead and innovate. According to our data, hedge funds were bearish on SunPower Corporation (NASDAQ:SPWR) in the second quarter. A total of 17 funds reported stakes worth $114.72 million (representing 3.10% of the float) at the end of June, down from 35 funds and $219.84 million, respectively, at the end of March.

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