Commodities & Metals

Molycorp... When Bubble Stocks Disappoint on Earnings (MCP, REE, AVL, REMX)

Molycorp Inc. (NYSE: MCP) is about as frequently referred to a bubble-stock as you can imagine.  So what happens when highly inflated stocks miss on earnings estimates?  Investors sold shares hard today as they wanted to get out ahead of the report, and now shares are lower in the after-hours session.  Avalon Rare Metals Inc. (AMEX: AVL) and Rare Element Resources Ltd. (AMEX: REE) are trading lower, and this sets the tone for a weak Wednesday in Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX).

Molycorp reported that earnings were only $0.01 EPS.  We had expectations of $0.10 EPS in our prior review.  The good news is that revenues rose 21% sequentially and they rose by 770% from a year earlier to $26.3 million as volume was up 9% sequentially and was up by 65% from a year ago.

Molycorp also reiterated that its Project Phoenix flagship leading rare earth facility at Mountain Pass, California is still running on-time and within budget expectations. 

We do want to add one thing despite our caution in a bubble.  Molycorp remains a late-2011 story and a 2012 story.  The rare earth facility and its full operations are just not fully up and running and not yet fully integrated.

If you want to see just how much the changes are in prices, its REOs realized an average sales price of $37.73 per KG, which is versus $34.02 per KG sequentially and versus $7.13/KG a year earlier. 

Molycorp shares closed down 7.1% at $66.47 ahead of earnings and the stock is down 6.7% at $62.88 in the after-hours session.  Its 52-week range is only about eight or nine months in reality but that range is $12.10 to $79.16.  As a reminder, because this stock is a story that will unfold later in the year and into 2012 the after-hours move might not be the same reading tomorrow.

Avalon Rare Metals Inc. (AMEX: AVL) closed down 2.8% at $8.24 today and the stock is down 2.9% at $8.00 in the after-hours session.  Rare Element Resources Ltd. (AMEX: REE) closed down 1.6% at $13.22 and shares are down almost 4% at $12.70 in the after-hours session.

Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) closed up $0.02 at $27.02 and it rarely trades in the after-hours.

JON C. OGG