Rare earth mining firm MP Materials (MP) jumped almost 7% on Monday after BMO Capital Markets (BMO) upgraded the stock from Hold to Buy with a new price target of $75. The upgrade was largely due to MP’s major new agreement with the U.S. Department of War (DoW). This deal includes price floors, guaranteed profits, financing support, and guaranteed material purchases (offtake), which BMO says firmly establishes MP as the “U.S. rare earth champion.”
TipRanks Black Friday Sale
- Claim 60% off TipRanks Premium for the data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
Even though rare earth prices have dropped after China temporarily eased export restrictions, five-star BMO analyst Raj Ray noted that the U.S. still faces serious supply chain risks. Because of this, he believes that MP is now an attractive stock for investors who want exposure to rare earths. He also pointed to MP’s joint venture with Saudi Arabia’s Ma’aden and the U.S. Department of War, which will help MP boost its production of neodymium-praseodymium oxide. Importantly, the DoW will fund MP’s share of the development costs.
Going forward, Ray said that the key will be how well MP executes its growth plans, especially the ramp-up of its Independence facility. If successful, this could lead to higher investor confidence and a higher valuation. Additional benefits may come from MP’s recycling partnership with Apple (AAPL) and new potential offtake agreements that could offer better prices than its current DoW contract.
Is MP Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MP stock based on 12 Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average MP price target of $79.44 per share implies 34.6% upside potential.
