Despite recently hitting a 52-week low, and then hitting successive new ones since, Molycorp (MCP) has engendered some extreme feelings from investors and analysts alike. Once the darling of the market as commodity prices soared, carrying basic material companies to new highs, many of these stocks have been trounced. There are now two very distinct schools of thought on Molycorp and the entire rare earth space in general. One group claims that despite the decline, the stocks are still over-valued and a dangerous investment; this group believes that prices will continue to go much lower. On the other side of this argument is the group that points out the long-term prospects of the company and the short-term technical indicators that are pointing to higher prices. While both groups have some valid points that should be considered, it is only when these views are combined that a clear picture of the company emerges.
The Pro-Molycorp Case
Those who argue in favor of Molycorp, and the rare earth industry in general, begin by acknowledging that one must first overlook the carnage that has taken place in the price of these stocks over the recent period. Instead, advocates argue, one should focus on the underlying demand for these materials. A recent report by Resource Investor considers the supply and demand situation. China is the most significant player in these materials, accounting for the bulk of both supply and demand. To continue reading, click here.