Besides the stock's movement being attributable to the bullish stance Wall Street has recently taken toward MP Materials, President Biden's interest in strengthening the U.S. supply chain represented another factor motivating investors to pick up shares last month.
Fairly new on the public market landscape, MP Materials hadn't garnered a lot of attention from analysts prior to June. Last month, however, Wall Street took notice of the rare earth mining company. On June 16, for example, J.P. Morgan initiated coverage on the stock with an overweight rating and a $41 price target, according to TheFly.com. The price target was certainly noteworthy considering that it represented about 28% upside to the stock, which had closed at around $32 on the previous day.
An even more bullish perspective came about two weeks later from Baird. Initiating coverage with an overweight rating, Baird analyst Ben Kallo set a $45 price noting that the company's principal asset, Mountain Pass, is "one of the largest integrated rare earth mining and processing facilities in the world."
Besides the attention from Wall Street, investors bought shares in response to President Biden's focus on securing rare earth minerals from sources outside of China. On June 8, the White House stated the Biden administration's belief that:
The government, working with private sector and non-governmental stakeholders, should encourage the development and adoption of comprehensive sustainability standards for essential minerals, such as lithium, cobalt, nickel, copper, rare earth elements, and other materials.
Investors' interpretation that this is an auspicious development for MP Mining was well-founded, as it seems the federal government is already taking steps to foster distance from China and its supply of rare earth minerals. The White House, for example, also announced that the Department of Defense invested "in the expansion of the largest rare earth element mining and processing company outside of China to provide the raw materials necessary to help combat the climate crisis."
As both legacy automakers and start-ups continue to put drivers behind the wheels of EVs, it's no surprise that MP Minerals is gaining in popularity. While the recent opinions from Wall Street are worth noting, it's important for investors to appreciate the fact that analysts oftentimes have shorter investing horizons than the multi-year approaches that we favor. Nonetheless, MP Minerals is undoubtedly a stock that investors interested in the EV industry should pay particular attention to in the future.