Why Solazyme's Shares Plunged
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 algae biofuel maker Solazyme (NAS: SZYM) fell 10% today after being downgraded by an analyst.
So what: Raymond James analyst Pavel Molkhanov downgraded the stock from outperform to market perform citing the stock's recent run-up as the cause. He had a $14 price target previously and said that now that the stock has hit the target, the risk-reward is no longer attractive.
Now what: At The Motley Fool, we don't take analyst upgrades or downgrades too seriously, and this short-term move shouldn't affect long-term investors' theses. I haven't liked Solazyme for a more fundamental reason: We have yet to see alternative fuels or other products become a sustainable, long-term business. It just isn't a risk I would be willing to take right now given the low cost of natural gas, a more well understood alternative fuel source than algae.
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At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.The Motley Fool owns shares of Solazyme. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.