Photo: Wikimedia Commons
JPMorgan upgraded MolyCorp again today. The firm’s been super-bullish on the US-based rare earth miner, and we’ve reported on several such upgrades.What’s really remarkable is not the new price target, but the simply unreal rally in the underlying price of the rare earth elemants.
Check this out:
We are raising our price target for MCP to $90 from $74 as we are moving our rare earth price forecasts higher. We feel comfortable with these higher numbers given the continued increase in domestic Chinese prices. We believe rare earth prices will not fall as significantly as the market anticipates as new supply eventually comes on line outside of China, and note that current Chinese domestic prices are supportive of MCP’s valuation. Specifically, if we were to input current Chinese domestic prices into our model starting in 2014, our NPV would still come in at roughly $75. Domestic Chinese rare earth prices continue to climb. Since just March 28, domestic prices for Ce are up 49% (to $8.99/lb from $6.05/lb), La up 75% (to $6.52/lb from $3.73/lb), and Nd up 23% (to $45.39/lb from $36.90/lb). We would also note that most domestic prices are now close to double the level of export prices seen this summer.
Note that the elements referred to above are Cesium, Lanthanum, and Neodymium.
Even in the age of surging commodity prices, 49% rallies since March 28 are unreal, and so it’s no wonder investors keep bidding these stocks up like crazy.
Here’s a one-year chart of MolyCorp:
Photo: Yahoo Finance