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D.A. Davidson Sees Molycorp as Best Pick for 2014, Boosts Target to $8

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In a report published Thursday, D.A. Davidson & Co. analyst Avinash Kant maintained a Buy rating on Molycorp (NYSE: MCP), raising its price target from $6.00 to $8.00.

According to the report, the price target raise was based on a discounted cash flow model, which applies a risk-free rate of 2% and a risk premium of 6%. Despite MCP's exposure to high-growth end markets, the analyst's have assigned a terminal growth rate of 3%.

“With heavy modernization and expansion investments at the key Mountain Pass facility, Molycorp is uniquely positioned to become the most prominent, vertically integrated, low-cost supplier of rare earth materials outside of China,” the report said. “Application of rare earths in high-growth end markets such as semiconductors, hybrid and electric vehicles, wind turbines and lasers is expected to raise demand at a 9% CAGR through 2016.”

Some key points from the report included:

-Beneficiary of rare earth sourcing away from China. -Rare earth prices stabilize as inventory overhang abates. -Most specific company concerns are behind them.

MCP closed Tuesday at $5.62.

Latest Ratings for MCP

DateFirmActionFromTo
Aug 2014Euro PacificDowngradesHoldSell
Aug 2014Euro PacificUpgradesSellHold
May 2014Morgan StanleyDowngradesUnderweight

View More Analyst Ratings for MCP
View the Latest Analyst Ratings

Posted-In: Avinash Kant D.A. Davidson & Co.Analyst Color Reiteration Analyst Ratings

 

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