Molycorp (MCP) Slammed As a Major Bull Turns Bearish

September 20, 2011 9:33 AM EDT
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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.

Shares of MCP are down 6.1 percent to $49.77 in early action Tuesday.

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Michael Gambardella
Yves on 2011-09-20 23:51:28
Mark as Spam | Reply to this comment

What is that guy doing on the market place???
Nothing suported his first crazy target. Actual REE market says ''buy''.

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