Good News: Solar Stocks Pop Again (Update)

Updated from 4:27 p.m. EDT, May 26

Shares of solar-energy companies rose sharply for a second straight day Wednesday as optimism appeared to flow again into a sector known for its volatility and speculative interest.

On Tuesday, Yingli Green Energy(YGE Quote) received an upgrade from an analyst at Lazard Capital Markets, and Canadian Solar(CSIQ Quote) reported a narrower-than-expected loss. Both stocks popped and took the sector higher with them.

Yingli shares jumped as much as 20% yesterday, and have continued to rise since, changing hands in afternoon action Wednesday at $12.26, up 10%, or $1.12, on volume of 8 million shares. Average daily volume is 6 million.

Canadian Solar shares, meanwhile, climbed another 11%, or $1.29, to $12.32, on double the daily average volume.

But some market watchers have suggested that the two-day surge has been at least partly caused by rising oil prices, which almost always sparks interest in alt-energy stocks, and a short-squeeze rally. According to the options newsletter Schaeffer Research, a bearish put/call ratio has afflicted Canadian Solar of late. Short sellers held about 11% of Canadian Solar's float as of April 29 and a whopping 15% of Yingli's float as of the same date.

Lazard's Sanjay Shrestha lifted his rating on Yingli to buy from hold Tuesday morning. He also increased his 2010 revenue forecast for Canadian Solar in a research note issued Wednesday. Even while he praised the long-term growth potential of the company, he cautioned investors about the short term, cutting his 2009 bottom-line forecast on Candian Solar to a loss of 11 cents a share from a loss of 6 cents.