Why Molycorp's Shares Lost Their Shine

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 rare-earth mineral miner Molycorp (NYSE: MCP  ) fell 28% today after the company reported earnings.

So what: Revenue rose 5% to $104.6 million in the second quarter, but the company reported a loss of $67.6 million, or $0.71 per share. Analysts had expected $105.9 million in revenue and a profit of $0.03 per share.

Now what: Prices for rare-earth minerals have fallen off a cliff, and Molycorp's financials are suffering as a result. It has tried to add downstream production to ease the pain in pricing, but so far it has yet to lift earnings. Until Molycorp reaches full production and prices stabilize, I'm staying far away from this stock.

Interested in more info on Molycorp? 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.

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Read/Post Comments (3) | Recommend This Article (3)

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  • Report this Comment On August 03, 2012, at 3:40 PM, JackLifton wrote:

    You say you are staying away from this stock "until Molycorp reaches full production." Don't you see that the problem is that Molycorp can't even sell what it is producing now at a profit. It won't help just to increase production unless there is a market demand for their products at a price where they can make a profit.

  • Report this Comment On August 03, 2012, at 5:10 PM, Mgaudet1 wrote:

    So Jack, you see nothing short of bankruptcy for MCP?

  • Report this Comment On August 03, 2012, at 7:13 PM, iheartweimers wrote:

    I expected a dip and held a position around $23.

    So I welcomed a drop to $13 and added. But $11

    is just a little bit crazy so I'm buying on margin

    and holding over the weekend with a $16 pps avg,

    which I think is doable next week when the market

    agrees that number is what MCP is actually worth.

    The clue to the worth of MCP is the extent to which

    the Chinese fulfill the export quotas, not the Q2

    earnings. Congress might help with financing on

    this one. Watch and learn.

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