MP Materials (MP) Stock: Why This Analyst Upgraded While Cutting the Price Target

TLDR

Table of Contents

BMO Capital upgraded MP Materials from Market Perform to Outperform while cutting the price target from $76 to $75
MP stock jumped 2.5% in premarket trading to $56.65 despite recent volatility from U.S.-China trade tensions
Shares dropped 22% over the past month but remain up more than 250% year-to-date
88% of analysts covering MP rate shares Buy, with an average price target of $79
China controls 85% of global rare-earth processing capacity, highlighting U.S. supply chain vulnerabilities

MP Materials caught a rare Wall Street move on Monday morning. The stock got upgraded while its price target actually went down.

MP Materials Corp., MP

BMO Capital analyst Raj Ray raised his rating on MP shares to Outperform from Market Perform. His price target dropped $1 to $75 from $76. The stock responded positively, climbing 2.5% to $56.65 in premarket trading.

This unusual combination tells the story of the rare-earths sector lately. The market has been a rollercoaster.

MP stock traded north of $100 per share in early October. That spike came after China threatened to restrict rare-earths exports. The stock then crashed back down as trade negotiations between the U.S. and China eased tensions.

Over the past month alone, shares dropped 22%. But zoom out further and the picture changes. MP stock is still up more than 250% so far this year.

Ray’s upgrade focuses on America’s rare-earth vulnerability. He wrote that this vulnerability “has become blatantly apparent.” China dominates the global rare-earths market with an estimated 85% of processing capacity.

Strategic Value Trumps Price Swings

The recent pullback in rare-earth prices followed China’s removal of export restrictions. But BMO Capital argues the long-term investment case remains intact.

MP Materials operates the largest rare-earth production facility in the Western Hemisphere. The company mines these materials at Mountain Pass in California.

Rare-earths go into everything from smartphones to fighter jets. Past threats from China to cut off supply have pushed the U.S. government to act.

In July, the Defense Department announced a deal with MP. The agreement aims to dramatically increase domestic production of rare-earth products. It includes an equity stake, a price floor for materials, and a guaranteed customer for magnets.

Wall Street Bullish Despite Volatility

Analyst sentiment on MP remains strong. According to FactSet, 88% of analysts covering the stock rate shares Buy. The average Buy-rating ratio for S&P 500 stocks sits at just 55%.

The average analyst price target stands at $79 per share. That represents upside of more than 40% from Friday’s closing price.

BMO Capital pointed to MP’s joint venture in Saudi Arabia as another growth driver. The company is working with Saudi Arabian Mining Company and the U.S. Department of War to build a rare-earth refinery.

Goldman Sachs recently initiated coverage on MP with a Buy rating. DA Davidson also maintains a Buy rating on the stock. JPMorgan upgraded MP to Overweight, citing national security concerns around rare earths.

BMO stated that MP’s “strategically important assets will continue to warrant a premium multiple versus peers.” The firm views current prices as “an attractive entry point” after recent declines.

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