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.
Investors decided to put Century Aluminum stock back on the shelf today. Image source: Getty Images.
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.
More From The Motley Fool
- 10 Best Stocks to Buy Today
- 3 Stocks That Are Absurdly Cheap Right Now
- 5 Warren Buffett Principles to Remember in a Volatile Stock Market
- The $16,728 Social Security Bonus You Cannot Afford to Miss
- The Must-Read Trump Quote on Social Security
- 10 Reasons Why I'm Selling All of My Apple Stock