Why Solazyme's Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of algae biofuel maker Solazyme (Nasdaq: SZYM  ) fell 10% today after being downgraded by an analyst.

So what: Raymond James analyst Pavel Molkhanov downgraded the stock from outperform to market perform citing the stock's recent run-up as the cause. He had a $14 price target previously and said that now that the stock has hit the target, the risk-reward is no longer attractive.

Now what: At The Motley Fool, we don't take analyst upgrades or downgrades too seriously, and this short-term move shouldn't affect long-term investors' theses. I haven't liked Solazyme for a more fundamental reason: We have yet to see alternative fuels or other products become a sustainable, long-term business. It just isn't a risk I would be willing to take right now given the low cost of natural gas, a more well understood alternative fuel source than algae.

Interested in more info on Solazyme? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Solazyme. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (5) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 05, 2012, at 5:50 PM, avgguy101 wrote:

    Would someone enlighten me about Motley Fool?

    They don't like this stock (solazyme) in this post, but according to the service I pay for they do. A real "Rule Breaker".

    Maybe the Fool is me for paying for the buy side and getting to ready the sell side from the same organization.

    Would love to hear from others....

  • Report this Comment On July 05, 2012, at 5:54 PM, TMFCheesehead wrote:

    avgguy101-

    I think the most important thing to realize--in this respect--comes at the end of all of our articles:

    <<We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.>>

    We openly encourage disagreement to get as much info. as possible out there.

    Fool on!

    Brian Stoffel

    (Long SZYM)

  • Report this Comment On July 05, 2012, at 10:50 PM, lanceim59 wrote:

    Obviously the author of this article is a real life fool and needs to find another job. I know McDonalds is hiring.

  • Report this Comment On July 05, 2012, at 11:10 PM, hikingviking wrote:

    Anybody know if a little known company called Viral Genetics VRAL.PK and their LipidMax product will help SZYM produce biofuel at a lower cost? Or is VRAL.PK a scam?

  • Report this Comment On July 06, 2012, at 9:57 AM, maniladad wrote:

    Although SZYM is involved in production of fuel oils the big future is in specialized oil production, as for cosmetics, food and a huge variety of others. They snip off a bit of DNA, add it to a batch of algae, then propagate the algae to produce a tailor-made product. It's a beautiful set-up and they've got the patents.

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