Shares in USA Rare Earth (USAR +2.40%) declined by more than 20% in the week to Friday at 1:30 p.m. This sort of move, although unwelcome, isn't surprising because this is a stock that trades on sentiment as much as it does on any debate over the long-term fundamentals.
Why sentiment guides USA Rare Earth stock
The company's peer, MP Materials, received significant government investment and support this year, so why can't USA Rare Earth? After all, the company is on track to start producing rare-earth magnets at its Stillwater, Oklahoma, facility in 2026 using non-China-sourced rare-earth materials.
NASDAQ: USAR
Key Data Points
In addition, management recently announced a "significant acceleration of the commercialization timeline for its Round Top heavy rare earth deposit in Texas" with commercial production at the deposit expected to begin in 2028. As such, the company is positioning itself to contribute to the critical need for a domestic supply of rare earth materials and magnets.
It's a valid argument, but it's also one that causes sentiment shifts in the stock as investors follow the ebb and flow of news regarding the U.S.-China trade conflict, statements on the provision of rare earth magnets, and potential actions by the Trump administration.
Image source: Getty Images.
Positive developments
Outside of sentiment matters, the company has made progress on derisking its operations recently. There's the aforementioned acceleration in its plans to develop the Round Top deposit, as well as the recent acquisition of a British rare earth metal and alloy company, Less Common Materials, which will help secure a supply of non-China-sourced materials for the Stillwater facility.
USA Rare Earth is a risky stock, but it also offers high rewards. Be aware that this week's volatility is something investors should be accustomed to before making a purchase.
