USA Rare Earth (USAR +2.79%) recently reported fourth-quarter 2025 earnings, including $1.64 million in revenue that marks its first-ever sales. It's a solid step toward the company's goal of establishing a domestic supply chain of rare earth materials and magnets, an industry that China dominates.
The U.S. government wants a domestic source for rare earth materials, and USA Rare Earth may be the solution. The company is working to finalize a collaboration with the U.S. Department of Commerce that would provide USA Rare Earth with $1.6 billion in funding under the department's CHIPS Program, contingent on certain milestones.
However, USA Rare Earth's stock has been very volatile. With shares down over 60% from their high, is there enough good news in the company's earnings report to justify buying the stock now?
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USA Rare Earth is making progress on all fronts and has plenty of funding
The company announced the commissioning of Phase 1A of its magnet facility. It could begin fulfilling customer orders for sintered NdFeB permanent magnets in the second quarter of this year, ramping up to 600 metric tons per year by year-end. Management expects Phase 1B to bring capacity to 1,200 metric tons per annum by the first quarter of 2027.
USA Rare Earth is also acquiring Texas Mineral Resources Corp. (TMRC +0.81%), which will make it the sole economic beneficiary of the Round Top deposit upon closing. Speaking of Round Top, USA Rare Earth hopes to complete the preliminary feasibility study by the third quarter of 2026 and the definitive study by early 2027, allowing engineering work to proceed. Commercial operations could begin by late 2028.
Management noted in the fourth-quarter update that it hopes to finalize USA Rare Earth's funding agreement with the government this month. And following the recent PIPE raise, USA Rare Earth is taking these next steps across its business, with approximately $1.75 billion in cash and no debt. It's a great spot for the company.
NASDAQ: USAR
Key Data Points
An attractive valuation makes the stock a buy for speculative investors
Where does that leave the stock with investors? USA Rare Earth has $1.75 billion in cash and a market cap of just $2 billion. In other words, investors are paying about $250 million for the business assets.
Wall Street analysts currently estimate USA Rare Earth will generate $50.8 million in revenue this year, and $289.7 million in 2027. Although $250 million is a steep price for what's almost zero revenue right now, you can see how quickly that may change over the next two years as operations begin to ramp up.
USA Rare Earth will likely remain a risky stock for the foreseeable future. The government backing could fall through. Perhaps there are setbacks at Round Top or the magnet facility. That said, USA Rare Earth trades at a fairly attractive valuation that could look even better in a year or two. That makes the stock a speculative buy in a diversified portfolio today.
