Rare-earth metals are among the top investment trends right now. These commodities are essential in products from mobile phones to military hardware. Thus, China's dominance of the rare-earth metals market represents a massive geopolitical risk for the United States.
Because of this, the U.S. government has taken an increasingly aggressive role in reducing this dependence. One way it's doing this is by providing U.S.-based early-stage rare-earth metal companies with growth capital. That's the story with USA Rare Earth (USAR 6.31%).
NASDAQ: USAR
Key Data Points
Over the past 12 months, this stock has risen 82% amid a wave of promising developments, and is now near $25. And this stock's recent success could be just the start of a longer-term price run-up.
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What's driving USA Rare Earths' latest rally
On Jan. 26, USA Rare Earth announced that it had received a letter of intent from the U.S. government providing $1.6 billion in loans and federal grants. In conjunction with this transaction, USA Rare Earth is raising an additional $1.5 billion in equity from private investors.
Following this capital raise, USA Rare Earth will have nearly $3.5 billion of the $4.1 billion needed to complete both of its major projects: a rare-earth mine in Sierra Blanca, Texas, and a magnet manufacturing plant in Stillwater, Oklahoma.
It's not surprising that several sell-side analysts have increased their price targets in response. For instance, Canaccord analyst George Gianarikas raised his price target for USA Rare Earth from $23 to $33 per share. Subash Chandra, an analyst at Benchmark, raised his price target even further, from $15 to $45 per share.
There are both rewards and risks
USA Rare Earth has been a winner for investors lately. However, while potential upside is very high, so too is downside risk. Any hiccup or stumble with its rare-earth metals infrastructure development efforts could result in big losses.
Nevertheless, if you're bullish on the trend and are hunting for a potential millionaire maker among rare-earth stocks, USA Rare Earth checks many of the boxes.
