The Pentagon Just Made a Huge Bet on MP Materials. How Should You Play MP Stock Here?

MP Materials (MP) shares are trading nearly 50% higher today after the Defense Department announced a massive investment in the Las Vegas-based rare earth miner.  

The Pentagon has agreed to load up on $400 million worth of MP’s preferred stock – positioning itself as the company’s largest shareholder, a press release confirmed on Thursday. 

More Top Stocks Daily: Go behind Wall Street’s hottest headlines with Barchart’s Active Investor newsletter.

 

Including today’s rally, MP stock is up some 200% over the past 52 weeks. 

www.barchart.com

Why Is MP Stock Going Parabolic?

Investors are cheering the DoD’s endorsement this morning as it significantly improves MP Materials’ strategic and financial stature. 

With an investment that wins it the largest stake in the NYSE-listed firm, the U.S. government is signaling long-term confidence in MP’s role as a cornerstone of domestic rare earth production – an industry critical to national security, clean energy, and advanced manufacturing. 

The deal includes a 10-year purchasing commitment and a price floor of $110/kg for the company’s NdPr products – ensuring predictable cash flow and protection from market volatility. 

Combined with $1 billion in private financing and a $150 million government loan, MP Materials now has capital to expand its magnet manufacturing capacity and rare earth separation capabilities.

Simply put, MP shares are rallying hard on Thursday because the Pentagon investment positions it as a dominant player in a supply chain the U.S. is eager to reclaim from China. 

Should You Invest in MP Materials Shares Today?

While the government’s stake could prove game-changing for MP Materials, caution is warranted in buying its stock at current levels due to valuation concerns. 

MP is going for a price-sales (P/S) ratio of about 25x at the time of writing, which is unusually high for a mining and materials company. 

It is, therefore, recommended to wait for a pullback before initiating a position in MP stock. 

MP Materials Rally May Have Gotten Ahead of Itself

Investors should also note that MP Materials stock has now surpassed even the most bullish Wall Street forecast. 

Heading into Thursday, the highest price target on MP shares stood at $42 – which actually signals potential downside from current levels. 

www.barchart.com

On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.