MP Materials is the IBD Stock Of The Day for Wednesday. Shares are actionable from a trendline entry as the rare earth minerals miner is set to join the S&P MidCap 400 next week.
Las Vegas-based MP Materials specializes in mining Neodymium-Praseodymium (NdPR), as well as Lanthanum, Cerium, Bastnaesite, and materials for high-strength magnets. These minerals and magnets are utilized across a variety of industries, which help power advanced electronics, wind turbines and EVs, as well as defense and aerospace systems.
MP owns and operates the only significant rare earths mine and processing facility in the U.S., just east of Los Angeles. MP is developing a rare earth magnet production facility in Fort Worth, Texas, which it expects will produce finished neodymium-iron-boron magnets by the end of this year.
Mineral Demand And China Export Restrictions
These materials are in high demand, and the industry's supply chain stepped into the spotlight this year as the U.S. and China wrestle over a rare earth minerals deal. China began restricting rare earth metals exports to the U.S. late last year in response to U.S. curbs on semiconductor technology. Some of China's export restrictions have been eased, but no formal trade deal yet has been established between the two countries.
In response, the U.S. government and U.S.-based firms are collaborating to establish their own domestic mineral supply chains.
The Department of Defense in July struck a public-private partnership with MP Materials to "dramatically accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency."
Per the agreement with the DoD, MP Materials will construct a second domestic magnet manufacturing facility "at a soon-to-be-chosen location to serve both defense and commercial customers."
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As part of the deal, the DoD committed to buying NdPr for $110 per kilogram, nearly double the market price.
The Pentagon also committed to purchasing $400 million of MP stock with warrants for additional purchases. The total comes out to around 15% of MP stock, making the DoD a top shareholder in the company.
MP Materials in July also announced that it secured a $500 million investment from Apple to launch a rare earth metals recycling facility. Under the agreement, MP Materials plans to supply Apple with magnets produced at its Fort Worth, Texas facility, using recycled metals produced at its Mountain Pass site in California.
Apple and MP over the last five years have piloted advanced recycling technology. The company also plans to expand the Fort Worth magnetics facility as part of the Apple and DoD deals, the MP Materials said.
Earnings
MP Materials on Aug. 7 reported that its Q2 loss narrowed slightly to 13 cents per share adjusted, which topped estimates for a loss of 20 cents. Revenue jumped nearly 84% to $57.4 million, also ahead of views for $46.1 million.
Materials revenue increased 20%, while sales for its magnetics segment was flat year-over-year.
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DA Davidson on Sept. 2 lifted its price target on MP stock to 82 from 32, The Fly reported. The firm cited MP's Q2 results, as well as its DoD agreement that creates a price floor for its NdPr products. The company's NdPR output continues to climb and is near record levels, while further progress has been made to scale commercial magnet production, DA Davidson said.
The firm kept a buy rating on MP stock.
MP Materials Stock
MP stock is actionable, after rebounding from its 50-day line. A break above a down-sloping trendline also provided an alternate entry just above its 21-day exponential moving average.
Shares are working on a sloppy base, but need until the end of next week to finish forming. MP Materials hit a record high of 82.50 on Aug. 11 before struggling with a downtrend through last week.
Still, the stock rallied more than 333% this year.
Meanwhile, MP Materials will join the S&P MidCap 400 on Sept. 22, replacing Emcor Group.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
