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.
So what: Yesterday's drop was a result of another massive loss in the first quarter and today analysts at JPMorgan piled on by downgrading the stock to underweight. They said another capital raise is likely this year, which is logical considering the rate Molycorp is burning through cash.
Now what: Cash balance on March 31 was $236.1 million but operations burned through $45.8 million in the first quarter and there was another $29.8 million spent on capital expenditures. With rare earth mineral prices falling as Molycorp increases supply, there's no reason to think that operations will suddenly turn cash flow positive and the only option to stay afloat is to sell more shares. With so many factors working against Molycorp, I'd stay far away from this stock.
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Travis Hoium has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.