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 Inc (NASDAQOTH: MCPIQ ) plunged 14% today after the company reported earnings.
So what: Revenue dropped 4% sequentially in the first quarter to $118.5 million, which is significant because shipments actually increased 10% over the same timeframe. The lower average selling price also put pressure on the bottom line, where Molycorp lost another $86.1 million, or $0.40 per share.
Now what: Molycorp continues to run into the problem of inelastic demand in the rare earth market, which caused high prices four years ago when supply was low and is now causing rare earth mineral prices to drop because supply has increased. I don't see that macro challenge changing any time soon, and even increasing supply would exacerbate the problem. There's really nothing Molycorp can do except hope that demand for its products increases, but that's largely out of its control, as is the global supply of rare earth minerals. Facing those headwinds, I don't see any reason to own the stock in today's market.
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