What happened
Shares of London-based silicon metal maker Ferroglobe PLC (GSM 0.80%) closed 11% higher on Friday after jumping as much as 17% the day before. And this time, there may even be a reason for the rise.
Yesterday, just before the close of trading, analysts at Jefferies reported back from a meeting they'd just held with Ferroglobe management. As revealed in a note on TheFly.com, Jefferies said that Ferroglobe management is "absolutely not considering a sale" of the business -- although if it were, it would've explained why investors were suddenly so interested in the stock.
Even if Ferroglobe isn't for sale, this analyst thinks it deserves a thumbs-up. Image source: Getty Images.
So what
But if that's the case, why is Ferroglobe stock still rising? Perhaps because, even as it threw cold water on the idea that Ferroglobe was interested in selling, Jefferies simultaneously argued that the stock is worth buying.
According to Jefferies, Ferroglobe management is planning to respond to falling silicon metal prices by slowing down production or even idling capacity -- so as to not flood the market with too much supply and drive prices (and profits) even lower. For investors in an independent Ferroglobe, this is good news.
Now what
Jefferies noted that, with silicon metal prices falling, it's less optimistic now than it once was about the stock. With profits harder to come by, Jefferies says it's cutting its price target on Ferroglobe shares to $10.
Still, given that Ferroglobe stock costs only $8 today, there still may be as much as 25% profit available for investors who buy the shares. Accordingly, Jefferies says it's maintaining a buy rating on Ferroglobe stock.
