Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why MP Materials Stock Rallied 20% in Early Trading Today

By Reuben Gregg Brewer - Dec 7, 2020 at 1:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The recently public miner hit the market at just the right time, stoking investor enthusiasm. Here's what you need to know.

What happened

Shares of rare-earth miner MP Materials (NYSE:MP) rose dramatically in early action, gaining just over 20% in the first hour or so of trading. Although the stock gave back some of that gain, by 12 p.m. EST it was still up a hefty 16%.

So what

Although there didn't appear to be any specific news out of MP Materials that would have led to today's early advance, the real story here is much bigger than a single day. MP Materials is a U.S.-based rare-earth metals producer. Rare-earth metals are used in technology products, such as the magnets used in electric automobiles. The vast majority of the industry is located in Asia, which has some people worried about access to these vital high-tech materials. In fact, China recently passed a law that would allow it to restrict exports of these metals -- a move that could cripple other countries if they were reliant on China for such materials.   

An electric vehicle charging at a charging station.

Image source: Getty Images.

Which is where MP Materials comes in. The company owns the only large rare-earth metals mine in North America. Brought public through a reverse merger with a special purpose acquisition company (often referred to as a blank check company), it has laid out a plan to expand and grow its business while at the same time helping to ensure U.S. access to rare-earth metals. That's a compelling long-term theme for investors looking to find a way to tap into the growth of things like electric vehicles. Making MP Materials even more attractive is that it happened to come public at a time when rare-earth metal prices have been generally on the rise. In other words, not only is this a way to play the long-term trend in the rare-earth space, but it's also a convenient way for investors to ride the short-term ups and downs of the rare-earth metal commodity markets.  

Now what

The long-term story here is compelling, given that global tensions are on the rise between China, the United States, and other large Western nations. That said, MP Materials is a miner and its products are commodities, so it wouldn't be surprising to see swift price advances followed by price declines at some point. Complicating that is the company's short history as a public company, which means investors are only just starting to get to know it. Notably, the stock is up around 75% in less than a month in its current form, so a lot of positive news may have been priced in here already. All in, it's kind of hard to read too much into one day's price action here.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
640%
 
S&P 500 Returns
139%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.