Update II: "After Thrashing by JPM, Morgan Stanley Says Nice Things About Molycorp (MCP)".
Update: "More on JPM's Downgrade of Molycorp (MCP)"
The stock is trading at $45.17, down $7.84.
As the company has not put the mine into production the changes in the prices of rare earths affect the piles of ore that are being processed. We'll see where prices are when the mine is at full production, I've said the best play by the Chinese would be to keep prices high, benefiting Chinese producers until Mountain Pass comes online and then crashing the market.
For some reason I am reminded of the Erie Railroad and the way Vanderbilt and Drew moved that sucker around.
In the meantime MCP has to buy a miner of heavy rare earths and they'd probably prefer their stock was up when they do it.
From Street Insider:
Shares of Molycorp (NYSE: MCP) are under heavy pressure early Tuesday after one of the biggest bulls covering the company downgraded the stock.
JP Morgan's Michael Gambardella, who has had an Overweight rating on the stock since first launching coverage after its IPO public, downgraded the rare earth miner from Overweight to Neutral. He also cut his price target from $105 to $66.
Gambardella cited the recent drop in rare earth
prices, which he blames on China rare earth oxide speculators - the same group that drove the run-up.
"While we continue to expect the Chinese government to reduce illegal rare earth supply and consolidate (and restrict) production over time, we are taking a more cautious stance on the stock given the near-term uncertainties that have recently arisen from the news of speculation and the recent downgrade of rest of the world 2011 demand forecast from IMCOA to 40k tonnes from 60k tonnes," Gambardella said.
Since the July highs, export Ce, La and Nd prices are down 48%, 36% and 22%
respectively, the firm notes. Domestic Chinese prices, however, have held up better, with Ce, La and Nd prices down 19%, 13% and 26%, respectively.
The firm lowered their 2011 EPS from $2.44 to $1.75, 2012 from $6.10 to $3.15 and 2013 from $14.55 to $11.20. For this year, the firm cut Q311 from $0.86 to $0.70 and Q4 from $1.10 to $0.56.