January 10, 2013
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 Molycorp (NYSE: MCP ) fell as much as 25% today, after the company gave weak guidance numbers.
So what: Molycorp announced that its production facilities are in place and moving toward full-scale production, but it also lowered expectations about revenue and cash flow. Management said that, due to production delays and lower rare earth mineral prices, the company wouldn't hit previous 2013 revenue and cash flow targets. Worse yet, it also said it's evaluating capital needs for 2013.
Now what: Shares popped last week when Bloomberg said the company may be a takeover target, but I reminded investors that operating conditions continue to deteriorate, and this was no time to buy. Today, management confirmed that operations are getting worse and, with no end in sight to the drop in rare earth prices, this stock could easily end up at $0. Let's remember, this mine has already gone bankrupt once, so there's already precedent there. For this Fool, there are just too many questions outstanding to buy this stock.
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