MP Materials Stock Gained Despite a Big Share Sale. Here’s Why.

An ore-crushing station stands at the Mountain Pass mine, operated by MP Materials, in Mountain Pass, Calif., in 2019. (Joe Buglewicz/Bloomberg)

Deutsche Bank raised its price target on shares of the rare-earth-metals miner MP Materials by 235%, making it the highest on Wall Street.

That helped the stock grind out another gain, despite a capital raise by the company.

Deutsche Bank’s Corinne Blanchard kept her Hold rating on MP Materials stock, but raised her price target to $67 a share from $20. The reason for the substantial increase is easy to explain.

The company signed a blockbuster deal on July 10 with the Defense Department, providing capital and a customer for domestically produced rare-earth materials. Days after that, Apple signed an agreement with MP Materials, providing capital in exchange for access to non-Chinese materials.

The deals amount to a lot more business for MP Materials. And the agreement with the Pentagon included a price floor for MP Materials’ products to ensure that, even if China floods the market, depressing rare-earth prices, MP Materials’ returns would still be fine.

China dominates rare-earth materials, refining some 85% of the global total. Earlier this year, it threatened to restrict rare-earth exports amid rising trade tensions with the U.S.

“Both agreements significantly derisk the company’s operations, provide critical funding for portfolio expansion, and will help transform MP from a commodity producer vulnerable to Chinese pricing dominance to a strategic partner with [a] guaranteed pricing floor,” wrote Blanchard.

The stock, however, is up about 275% year to date as of Thursday trading.

“Most risk/rewards are now fully priced in,” Blanchard said. “We recognize the merits of the DoD partnership, but also believe the stock has now priced in the catalyst, and other potential catalysts are on the medium-term now.”

She forecasts 2028 earnings before interest, taxes, depreciation, and amortization 0f $495 million. Her valuation of the stock is based on 20 times that estimate.

MP will spend some $650 million cumulatively in 2026, 2027, and 2028 on new capacity to generate those earnings, according to Blanchard. Capital spending in 2025 is expected to be about $160 million, according to FactSet.

MP Materials stock traded as low as $54.80, but recovered to close at $60.26, up 2.9%. The S&P 500 and Dow Jones Industrial Average rose 0.5%.

The analyst report wasn’t the main reason for the initial dip on Thursday. Wednesday evening, MP Materials announced a $500 million stock sale, taking advantage of the shares’ recent strength to raise capital. Demand was strong, and MP Materials ended up selling $650 million worth of shares at $55 each.

MP Materials “currently intends to use the net proceeds from the Offering to fund the acceleration and expansion of our operations, including the 10X Facility, for strategic growth opportunities and for general corporate purposes,” said the company in a news release. The 10X facility, MP’s second domestic plant for making rare-earth magnets, is part of the Defense Department deal.

Selling stock can pressure shares of any company. It can also be a signal that management thinks the share price is high. Still, there is a lot of growth ahead. MP Materials is now expected to expand magnet capacity by some 900% in only a few years. Building capacity takes money.

Blanchard’s target price is now the highest on Wall Street, according to FactSet. The average analyst price target is about $38 a share, but analysts have had trouble keeping up with the gains as the stock has soared from about $16 at the start of the year. The most current price targets, set following the DoD deal, range from about $55 to $65 a share.

Overall, Wall Street remains bullish on MP Materials stock, with 73% of analysts rating the shares a Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

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