USA Rare Earth Stock Jumps. Why an Analyst Just Rated It a Buy.

Neodymium, a rare-earth element used in strong, high-strength permanent magnets. Shares of rare earth miner and processor USA Rare Earth got a new Buy rating on Monday. (Dreamstime)

Key Points

• USA Rare Earth stock increased by 14% to $31.59 following a ‘Buy’ rating from William Blair analyst Neal Dingmann.
• Australia plans to offer its rare earth resources to the U.S. to reduce China’s dominance in the rare earth market.
• USA Rare Earth is a fully integrated rare earth company with a research facility, magnet manufacturing, and majority ownership of the Round Top mine.

The rare-earths rally continued Monday following a bullish call on USA Rare Earth as the U.S. tries to break China’s monopoly on the materials.

William Blair analyst Neal Dingmann launched coverage of USA Rare Earth on Monday with the equivalent of a Buy rating, believing the U.S. government isn’t done investing in domestic rare-earth companies. He doesn’t have a price target for shares. A Buy at William Blair essentially means they expect the stock to outperform the market.

USA Rare Earth stock jumped 14% to $31.59, while the S&P 500 and Dow Jones Industrial Average rose about 1.1%.

“USA Rare Earth is one of few fully integrated rare earth companies,” wrote Dingmann. “It features a research facility developing proprietary rare earth extraction and purification technology, a magnet manufacturing facility, and majority ownership of the Round Top mine in Texas. Its magnet facility will soon begin production, supported by its acquisition of Less Common Metals (LCM), providing metal-making and strip-casting operations, and we expect the combination of these factors to generate long-term shareholder return.”

USA Rare Earth doesn’t generate significant sales yet. Its projects are under development. That hasn’t stopped investor interest, though. Coming into Monday trading, USA Rare Earth stock was up about 142% so far this year.

Interest in rare earths rose after China, which dominates production and processing of them, threatened export controls on the materials, which put U.S. manufacturing at risk. Rare-earth materials end up in everything from an EV to a wind turbine to a fighter jet. Shares of MP Materials , the largest rare earth producer in the Western Hemisphere, were up more than 400% so far this year, entering Monday trading.

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The overreliance on China helped lead the Defense Department to do a blockbuster deal with MP in July that included an equity stake, a price floor for rare-earth products, and a guaranteed customer for any magnets produced from planned capacity. The agreement transformed the domestic rare earth industry overnight.

“Hot take. The U.S. government may announce [a] sizable investment in the company,” added Dingmann in his report. If he’s right, it would give shares another boost.

New buy ratings typically help stocks. The meeting between President Donald Trump and Australian Prime Minister Anthony Albanese also helps. The two announced a framework agreement between the two nations designed to unlock more capital for the sector.

Shares of Australia rare earth miner Lynas Rare Earth were up 6.6% in overseas trading. Shares of MP Materials were up 2.6% at the close at $82.90.

For USA Rare Earths, now five analysts cover its shares—according to FactSet. All five rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

The average analyst price target for USA Rare Earth stock is about $24. That’s below where shares are trading, but Wall Street has had trouble keeping up with gains. The more recent price targets for USA Rare Earth stock are closer to $30 a share.

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