Shares of USA Rare Earth (USAR +2.79%) made some big moves back in January, when the exploration-stage company's stock more than doubled, thanks to a spate of promising news. Since then, however, price action has been much less stellar.
Even as the company continues to make further commercialization efforts, this growth stock has given up much of January's gains. It could even finish the month back below $15 per share.
Yet while turbulence has reemerged in the near term, the story with this mining stock could prove more promising in the long term.
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Why excitement for USA Rare Earth has cooled once again
USA Rare Earth went public back in late 2024, but it took many months before this became one of the most talked-about growth stocks on Wall Street. First, back in October, as a detente in the U.S.-China trade war highlighted China's strong leverage in negotiating trade terms, due to its dominance of the rare-earth elements market, investors began to grow bullish about companies seeking to capitalize on the U.S.'s desire to mitigate this dominance.
NASDAQ: USAR
Key Data Points
Then, in January these geopolitical trends became a more direct catalyst for USA Rare Earth. That's when the U.S. government agreed to provide $1.6 billion in funding and loans to the company, in conjunction with the company receiving $1.5 billion in capital funding from private investors.
This was a highly bullish sign for investors. Why? Not only did the deal signal that USA Rare Earth could meet its commercialization timeline. Per management, this sudden capital infusion now enables the company to bring its rare-earth metal exploration and processing operations online by 2028, two years ahead of schedule.
Unfortunately, the sharp wave of bullishness that hit USA Rare Earth in January has since dissipated. The market has put this stock on the back burner, ahead of the next wave of game-changing news. However, the company continues to make promising progress. There have also been few, if any, changes to its long-term forecast.
How this cooldown could work in your favor
Far from sitting on its laurels, USA Rare Earth continues to charge ahead. For instance, earlier this month, the company agreed to acquire Texas Mineral Resources in an all-stock deal worth $73 million.
Once this deal closes, USA Rare Earth will acquire this company's 18.6% interest in the Round Top rare-earth mining operation in Texas. In hindsight, paying this relatively small figure for Texas Mineral Resources could prove to be a very shrewd deal -- at least, based on forecasts included in USA Rare Earth's February 2026 investor presentation.
Per these forecasts, by 2030 the company could be generating $2.6 billion in revenue, $1.2 billion in EBITDA (earnings before interest, taxes, depreciation, and amortization), and $900 million in free cash flow. Given the stock's current market cap of just $3.8 billion, this strongly suggests that shares could be worth substantially more than the current stock price, once the company is at full production mode.
With this, buying today, while it's potentially an undervalued stock, could be a very profitable long-term investment. Of course, with big upside potential comes big risk.
The best approach for long-term investors
It's best to err on the side of caution, and take long-term forecasts with a grain of salt. USA Rare Earth may now have most of the capital needed to fund its expansion, but execution risk remains.
It's also possible that USA Rare Earth will need to raise even more capital than expected, to fund both its ramp-up efforts, and to cover short-term cash burn. While perhaps well-capitalized for now, further dilutive capital fundraises could happen down the road.
With this in mind, if you're bullish on the overall "growth story" with USA Rare Earth, walk rather than run into a position. Slowly accumulating a stake, capitalizing on any further near-term weakness, could increase the likelihood of USA Rare Earth becoming a profitable investment over a multi-year time frame.
