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Why Molycorp's Shares Popped

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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 miner Molycorp (NASDAQOTH: MCPIQ  ) are up 33% today after reporting better-than-expected earnings.

So what: First quarter revenue was up 9% sequentially, to $146.4 million, ahead of the $135.6 million estimate. On the bottom line, net loss was $47.2 million, or $0.33 per share, but when you adjust for one-time items, the loss was just $0.15 per share versus the $0.31 estimate. 

Now what: Beating earnings estimates is always good, but let's not forget that Molycorp is still losing money hand over fist. Management said that customers are beginning to buy in more normal patterns again as stockpiles fall, but we haven't seen an increase in rare earth prices, which would really help earnings. I'm not as bearish as I was a year ago on Molycorp, but I want to see this promise of positive earnings play out before buying the stock. When the company floods the market with another expansion of production, I'm afraid it will cause prices to plunge again, and we'll be facing losses again next year.

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

Read/Post Comments (1) | Recommend This Article (4)

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  • Report this Comment On May 10, 2013, at 5:33 PM, bashersuit wrote:

    Remember MCP is a cult stock that looked like it was going Bankrupt. Just like First Solar, Groupon I would never bet against a cult stock. Any signs of improvement will cause a buying frenzy

    Quote by Constantine Karayannopoulos

    "We are however beginning to see signs of demand returning to more normal levels across several segments. Customers appear to be working down inventories that were built up in 2011 and 2012 and we are starting to return to more normal purchasing patterns. Our production ramp up of Mountain Pass is progressing well"

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Related Tickers

12/31/1969 7:00 PM
MCPIQ $0.00 Down +0.00 +0.00%
Molycorp, Inc. CAPS Rating: **