Shares of aluminum producer Century Aluminum (NASDAQ: CENX) stock closed 10.3% lower on Monday. There wasn't any obvious catalyst for such a large drop in today's news...but if you peer back into last week, and also take a closer look today, you may find a couple less obvious catalysts.
Let's start with the price of aluminum itself. According to Kitcometals.com, 24-hour spot aluminum prices slid by about 2% in Monday trading, landing at $0.9137 per pound.
That seems a pretty small wobble in the metal's price to cause a 10% drop in the stock's price. But combine it with Friday's news, and investors might have found reason to get a little nervous. On Friday, you see, analysts at Berenberg announced they were downgrading Century Aluminum shares to "sell" and assigning a $10 price target. Their reason: "Elevated alumina feedstock costs" are "pressuring earnings" at Century Aluminum, as TheFly.com reports.
Higher input costs and lower prices on outputs are indeed a recipe for lower profit, should these facts hold true long enough to constitute a trend. There's no guarantee they will form a trend. But investors may be looking at Berenberg's target price -- which still represents roughly 16% downside risk even after today's decline -- and deciding that discretion is the better part of value investing when it comes to Century Aluminum stock.
10 stocks we like better than Century Aluminum
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Century Aluminum wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018