Why Molycorp's Shares Dropped Like a Rock


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 Molycorp fell as much as 25% today, after the company gave weak guidance numbers.

So what: Molycorp announced that its production facilities are in place and moving toward full-scale production, but it also lowered expectations about revenue and cash flow. Management said that, due to production delays and lower rare earth mineral prices, the company wouldn't hit previous 2013 revenue and cash flow targets. Worse yet, it also said it's evaluating capital needs for 2013.

Now what: Shares popped last week when Bloomberg said the company may be a takeover target, but I reminded investors that operating conditions continue to deteriorate, and this was no time to buy. Today, management confirmed that operations are getting worse and, with no end in sight to the drop in rare earth prices, this stock could easily end up at $0. Let's remember, this mine has already gone bankrupt once, so there's already precedent there. For this Fool, there are just too many questions outstanding to buy this stock.

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

The article Why Molycorp's Shares Dropped Like a Rock originally appeared on Fool.com.

Travis Hoium has no position in any stocks 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 has no position in any of the stocks mentioned. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.