MP Materials Stock Is Falling on a Strange Downgrade

MP Materials struck an investment deal by the Pentagon that will fund new and expanded rare earth mineral production facilities. (Michael Tessler / MP Materials)

Shares of MP Materials took a breather on Monday after catching a slightly strange Wall Street downgrade.

The stock fell 2.2% to $72.60, while the S&P 500 and Dow Jones Industrial Average fell about 0.3% and 0.5%, respectively.

Catalyzing the dip was a downgrade by CFRA analyst Matthew Miller, who slightly lowered his rating on MP stock to Buy from Strong Buy.

Analysts and brokers use a variety of labels for their ratings. A downgrade to Buy is a bit of an odd downgrade, but Miller’s view is a little more muted than it was before. Still, he raised his target price for the stock to $88 from $68.

The average target price for MP stock among Wall Street analysts tracked by Bloomberg has been rocketing higher in recent weeks, rising to almost $70 from about $30 at the start of July.

Catalyzing the changes was a blockbuster deal with the Defense Department that will transform MP’s capacity and profitability in the years to come.

The agreement includes an initial $400 million equity investment by the Pentagon in the Las Vegas-based rare-earth minerals producer, plus a commitment for up to $350 million in additional funding, and a $150 million loan from the Pentagon, according to regulatory filings. The money will fund the construction of a new domestic magnet-manufacturing facility, which the company dubbed the 10X facility, and the expansion of MP Materials’ current mining and processing capabilities.

MP’s annual rare-earth magnet-making capacity will rise to roughly 10,000 metric tons a year by the end of the decade. The old target, before the DOD investment, was about 3,000 metric tons annually.

Rare-earth materials end up in things such as magnets for electric motors and in navigation equipment. Today, China dominates rare-earth metals, controlling some 85% of global refining capacity.

In 2024, the Defense Department published its National Defense Industrial Strategy, which includes a “mine to magnet” plan for rare earths that aims to make the DOD self-sufficient by 2027.

MP is the largest producer of rare earths in the Western Hemisphere, making neodymium and praseodymium oxides, two rare-earth elements among a list of more than a dozen.

In 2025, MP is expected to generate about $15 million in earnings before interest, taxes, depreciation, and amortization, or Ebitda. Profitability will grow significantly in the coming years. The company expects about $650 million when new facilities are up and running a few years from now.

“We now view the $650 million Ebitda as a floor, and when accounting for commercial sales from the 10X facility, and additional Neodymium-Praseodymium products from heavy rare earths,” wrote Miller. “We arrive at a pro forma Ebitda of $850 million, [which] could prove to be a conservative estimate if [neodymium-praseodymium oxides] prices rise significantly above the $110/kg floor guaranteed by the DOD.”

He’s still bullish, just not as much as before. MP’s stock performance helps explain the change. Coming into Monday trading, MP stock was on a tear, up about 211% over the past three months.

The downgrade doesn’t change the Buy-rating ratio for the stock. Ratings aggregators typically only track Buy, Hold, and Sell ratings. Overall, about 69% of analysts covering MP rate shares Buy, according to Bloomberg. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

Write to Al Root at allen.root@dowjones.com