MP Materials Stock Surges, Then Dips. Wall Street Can’t Catch Up.

A rare earth magnet is being inspected at an MP Materials facility in Fort Worth, Texas. (Courtesy MP Materials)

Key Points

• MP Materials stock experienced a 1.6% decline after premarket trading above $100, following a 21% gain on Monday and an 8.4% jump on Friday.
• Rare-earth stocks rallied due to escalating U.S.-China trade tensions, with the U.S. planning tariffs in response to China’s export restrictions.
• Analysts expect MP Materials to secure new sales agreements totaling $300 million to $400 million in profit from its magnet business.

MP Materials stock whipsawed investors on Tuesday, eventually closing at another record. Recent gains haven’t given Wall Street a chance to catch up to increasing bullish sentiment on rare-earth players.

Shares traded above $100 in premarket action before sliding back as low as $88.60. Eventually, shares closed at $98.65, up 3.8%. The moves came after a 21% gain on Monday and an 8.4% jump on Friday.

Smaller rare-earth company USA Rare Earth traded as high as $42 on Tuesday, before closing at $37.54, down 2.9%. Ramaco Resources stock opened higher, fell into the red, and closed at $54.55, up 4.1%. The S&P 500 lost 0.2% and the Dow Jones Industrial Average added 0.4%. Both USA Rare Earth and Ramaco stocks have posted double-digit percentage gains in recent days.

The sector rally was prompted by escalating trade tensions between the U.S. and China late last week. On Friday, President Donald Trump said the U.S. would hit back against Beijing’s new export restrictions on rare-earth minerals with tariffs.

MP is the largest rare-earth producer in the Western Hemisphere. The company makes neodymium and praseodymium oxides, key components of magnets that often end up in high-tech products such as electric vehicles and F-35 fighter jets.

With investors piling into MP Materials and others, the high profile of rare earths probably reduces the risk of a share price drop for MP, Jefferies analysts led by Laurence Alexander noted Monday. They expect the company to secure new sales agreements in the next few quarters, totaling $300 million to $400 million in profit from their magnet business.

Alexander rates MP Materials a Buy with a price target of $90. Overall, 60% of analysts covering the stock a Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

The average analyst price target for MP is about $78, well below where the stock is trading. The stock was up more than 500% this year, and Wall Street has had trouble keeping up. The average analyst price target started the year at about $22 a share.

Price targets started to move much higher in July after the Defense Department and MP struck a blockbuster deal that included an equity stake in MP, a price floor for rare-earth products, and a guaranteed customer for new capacity.

MP “plans to manufacture 10,000 metric tons of magnets,” wrote Canaccord analyst George Gianarikas on Monday.

Century-old Vacuumschmelze of Germany produces about 1,000 tons in Europe and plans to expand, including a South Carolina plant with 2,000 tons of capacity, he added.

Other players with capacity plans include Noveon Magnetics of San Marcos, Texas, and USA Rare Earth, with its plans to build 4,800 tons of rare-earth magnets annually in Oklahoma.

“And we need it,” said Gianarikas. “There is still a large [capacity] void to fill.”

North American magnet demand today is roughly 50,000 metric tons a year and growing.

That’s what has investors excited.

Write to Elsa Ohlen at elsa.ohlen@barrons.com