High short interest and negative commentary haven’t deterred the share price of three battleground stocks from flying. Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), Tesla Motors Inc (NASDAQ:TSLA), and First Solar, Inc. (NASDAQ:FSLR) have shrugged off the shackles of negativity and shorts. Can they continue to beat the Street?
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.
Whither motoring momentum
Even as Tesla Motors Inc (NASDAQ:TSLA) has debuted the Model S to cheers from automotive magazines, Consumer Reports, and seemingly from everyone who’s taken a test ride, the company has a vocal jeering section.
On May 14 the company hit an all-time high of $97.12 only to sell off as low as $81.15. It could also have been a response to CEO Elon Musk’s tweet that a major announcement on their Supercharger technology would be postponed. Some also credited Fellow Fool Blake Bos’ article and video .
As Bos noted the company recently reported its first profit ever but growth was already baked in. On CNBC the bull argument was that Tesla Motors Inc (NASDAQ:TSLA) is in early stages of growth like Amazon.com, Inc. (NASDAQ:AMZN). Bear rebutted the average price point on Amazon was $10 for a purchase, not $50,000 making the addressable market exponentially smaller.
One risk to the stock is independent auto dealerships who feel if they can’t sell the Tesla Motors Inc (NASDAQ:TSLA) themselves then no one can. This is playing out now in Texas’ and North Carolina’s state capitols.
Musk has pleaded the case before state governments to sell direct to consumers and won. Whether North Carolina and Texas shut out Tesla and bow to pressure from auto dealers, residents can easily go out of state to buy what they want.
Retailers like Kroger and Walgreen are expanding the number of EV charging stations and putting paid to the charging range argument. Analysts predict a 39.7% five year growth rate and Morgan Stanley raised the price target on Tesla to $103.00.
Long term winners
Shorts may have to suffer further as these companies prove themselves winners. First Solar, Inc. (NASDAQ:FSLR)’s prospects are much brighter with the TetraSun buy and the P/E is low once again. I think Tesla Motors Inc (NASDAQ:TSLA) is a long term buy (on pullbacks) despite a 77 forward P/E. Green Mountain is still BFFs with Starbucks and that makes it a buy again. Don’t believe me…just look at the chart.
The article Battleground Stocks Winning Their Wars originally appeared on Fool.com and is written by AnnaLisa Kraft.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.