In recent years, trade tensions have revealed the U.S.'s heavy reliance on China for rare-earth elements and other critical materials used in advanced magnets, which are central to much of today's technology. The United States is taking drastic action to rebuild its supply chain for critical minerals, including taking an ownership stake in U.S.-based MP Materials (MP +1.23%).
MP Materials' stock surged last year in response to its deal with the U.S., which included price floors and long-term purchase commitments for its domestically produced magnets. However, the stock has since fallen 42% from its 52-week high price. Here's why investors may want to consider buying the dip in this rare-earth mining stock.
NYSE: MP
Key Data Points
MP Materials' earnings turned positive in the first quarter
When the U.S. began to rebuild its critical-mineral mining and processing supply chain, MP Materials emerged as a key player in achieving this goal. That's because the company operates North America's only large-scale rare-earth mining and processing site located in Mountain Pass, California.
At Mountain Pass, MP Materials operates an integrated upstream and midstream rare-earth processing facility where it transforms raw baronite ore into highly purified rare-earth oxides. From here, the company sends these materials to its magnetics facility in Texas, where it ships dry, high-purity Neodymium-Praseodymium (NdPr) oxide along with other separated heavy rare-earth, which are then transformed into sintered magnets used by commercial customers.
Last year, the company entered into a historic public-private partnership with the U.S. Department of Defense (DoD). The deal provides a 10-year, 100% magnet offtake commitment and a 10-year price floor mechanism guaranteeing $110 per kilogram for all neodymium-praseodymium (NdPr) products, which aim to insulate MP's business from aggressive foreign pricing strategies that have historically driven domestic producers out of business through artificial price suppression.
Image source: Getty Images.
The company saw a positive inflection in its business as illustrated by its solid first-quarter results. During the period, the company achieved a record NdPr production of 917 metric tons, representing a 63% year-over-year increase. Sales increased 49% to $90.6 million, while income from its price protection agreement rose $42.3 million. As a result, its adjusted EBITDA for the period was $36.6 million, a drastic improvement from last year's $2.7 billion loss.
MP Materials is scaling up its processing facility in California and boosting its magnet-making capabilities. To accomplish this, the company is developing a $1.25 billion "10X" magnet manufacturing campus in Texas, where it will aim to produce roughly 10,000 metric tons of NdFeB (neodymium-iron-boron) rare-earth magnets annually. Commissioning and production are slated to begin in 2028.
Is MP Materials a buy now?
MP Materials is seeing a positive earnings inflection, and analysts project non-GAAP earnings per share of around $0.23 this year, then growing 371% to $1.10 per share in 2027 and another 53% in 2028.
As MP Materials scales up its mining, processing, and manufacturing capabilities, the company has emerged as a crucial player in rebuilding the U.S. critical minerals supply chain. When its 10X facility comes online, the company will be well-positioned to capture business across the defense, robotics, wind energy, and automotive sectors, making the stock a buy for investors looking to capitalize on this critical minerals transition and the reshoring of Western supply chains.
