Shares of MP Materials Corp. (NYSE: MP) took the entire market by surprise in the second week of July 2025, as the stock unexpectedly jumped by as much as 44.7% in that short period. While this could trigger most investors to look the other way, feeling that they have missed the boat and would likely land on the wrong side of a trade if they chase after the tock higher, the truth is that there are other factors still at play that can lead MP Materials stock into a higher level.
One of these factors is what is happening in the broader economic spectrum, especially when it comes to where trade tariff negotiations are headed within the United States' rare earth metals industry. When comparing the performance of the S&P 500 index against the Materials Select Sector SPDR Fund (NYSEARCA: XLB) to represent the basic materials sector, investors will quickly find out where the market preference is today.
As basic materials outperformed the overall stock market, this signals investors to dig a little deeper to determine whether MP Materials can continue to lead this broader outperformance. This task is easier said than done. However, there are still very powerful gauges investors can look into for answers. This is why MP Materials stock is likely not done running higher.
A Big Government Bet Backs MP Materials
As a rare earth metals negotiation between the United States and China still develops, it has become clear that the American government needs to start protecting its intellectual property and national interests. One way to do this is to literally take control of the private companies heavily exposed to these materials.
This is where MP Materials, the nation’s largest rare earth miner and supplier, comes into play. The United States Pentagon has now become the company’s largest shareholder as it acquired up to $400 million of preferred stock in MP Materials, and there’s an even deeper reason for that.
Rare earth metals are crucial components in the defense industry, particularly in military weapons development, making it logical for the Pentagon to intervene and take control of its largest supplier during a period when these materials are at risk of being overwhelmed by overseas interests.
The question now becomes whether MP Materials is done with its path higher after a near 50% rally, and that is where the subtle market gauges come into play for investors to analyze further and justify these themes moving forward.
What the Market Says About MP Materials Stock
As soon as this acquisition announcement made headlines, Canaccord Genuity Group analyst George Gianarikas decided to reiterate his Buy rating on MP Materials stock; however, his price target really took everyone by surprise, especially compared to where he saw the company valued previously.
Compared to his previous $27 per share target, today’s $55 valuation is more than double, the sort of jump that investors rarely come by when it comes to Wall Street analyst ratings, and one to pay attention to. Relative to where the stock trades today, this valuation could be the trigger for further bullish developments in the coming months.
A $55 target calls for a new 52-week high to be made in MP Materials stock and an additional 22% upside potential even after a near 50% rally. When the stock breaks its 52-week high prices, a lot more institutional investors (focused on momentum) will likely come in and provide additional buying pressure for MP to keep going higher.
In fact, the broader market agrees with this view. On a forward price-to-earnings (P/E) ratio, MP Materials is set to command one of the largest premiums in the space, especially as the company could report steady profitability in the coming quarters if the United States government plans to roll out new contracts.
Whenever markets are willing to pay this much for a company whose earnings per share (EPS) have yet to stand the test of time, investors should get looking, since there is often a very good reason for this premium, one that typically brings about higher prices.
With this in mind, investors can reiterate the optimistic view of where MP Materials stock’s short interest stands today: a high 25.8% of the total share float. Considering how aggressively the stock has gone up and how much further it can go, this could set up a classic short squeeze scenario.
This is exactly what created the meme stock mania of the early 2020s. This event forces short sellers to close their positions at a loss (which involves buying the stock). Since MP Materials’ short interest is as high as $1 billion, wiping out these short sellers could send the stock to its current price target, if not even higher.
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The article "MP Materials Stock Booms on New Government Positioning" first appeared on MarketBeat.
