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Why Shares of MP Materials Skyrocketed 41% in 2021

By Scott Levine – Jan 12, 2022 at 6:09PM

Key Points

  • Wall Street is optimistic about MP Materials.
  • The company repeatedly beat quarterly earnings expectations.
  • It inked a major agreement with GM to supply rare-earth elements for EV motors.

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Interest in EVs boomed last year, and not just the stocks of carmakers benefited.

What happened

MP Materials (MP -4.59%) finished its first calendar year as a publicly traded company after completing its merger with a special purpose acquisition company, and it was a doozy. Shares of the rare-earth metals miner soared 41% in 2021, according to data from S&P Global Market Intelligence

In particular, it was the company's strong performance in the second and third quarters of 2021 that contributed most significantly to its rise. Some positive coverage from Wall Street and a deal with General Motors didn't hurt, either, in motivating investors to pick up shares.

A man and woman celebrate while looking at a computer.

Image source: Getty Images.

So what

Just as it had in the first six months of 2021, MP Materials continued to draw bullish attention from analysts in the second half of the year. In July, for example, D.A. Davidson began covering the stock, assigning a buy rating and a $45 price target, representing upside of about 29% at the time.

The bullish sentiment continued in November: Jefferies and Bank of America both initiated coverage on the stock with buy ratings and price targets of $55 and $52, respectively. Perhaps more compelling to investors than the buy ratings and price targets, however, was the commentary from Bank of America's analyst, Lawson Winder, who said that MP Materials represents a "critical raw material supplier" for EVs, according to

A couple of surprisingly good second- and third-quarter earnings reports also drove investors to pick up shares. MP Materials exceeded analysts' second-quarter 2021 expectations for revenue of $58.3 million and earnings per share (EPS) of $0.13, booking $73.1 million on the top line and EPS of $0.15.

The company beat analysts' estimates in the third quarter as well. While the Street expected sales and EPS of $74 million and $0.16, respectively, MP Materials reported revenue of $99.8 million and $0.23 in EPS.

Arguably, the company's biggest news of 2021 came in December, when it reported signing a binding long-term supply agreement with GM. According to the deal, MP Materials will provide rare-earth materials, alloy, and finished magnets for the electric motors used in the GMC Hummer EV, Cadillac Lyriq, Chevrolet Silverado EV, and more than a dozen other models using GM's Ultium Platform.

Now what

Investors are charged up about the prospects of EV stocks, and the performance of MP Materials in 2021 illustrates how that enthusiasm transcends carmakers. It provides crucial rare-earth elements to the EV manufacturers that are sourced from the company's asset in California -- to the delight of those interested in gaining independence from China's supply of such elements.

With the EV industry presumably continuing to boom, it wouldn't be surprising if the stock continues to run in 2022 as it had last year.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Scott Levine has no position in any of the stocks mentioned. The Motley Fool owns and recommends Jefferies Financial Group Inc. The Motley Fool has a disclosure policy.

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