MP Gains 135% Post Securing U.S. Govt. Backing: Buy, Hold or Sell?

Core Insights - MP Materials is becoming a vital player in the U.S. effort to establish a domestic rare earth supply chain, supported by partnerships with the U.S. Department of Defense and Apple [1][3] Group 1: Partnerships and Investments - On July 10, MP Materials secured a multibillion-dollar investment and long-term commitments from the DoD, which will fund the construction of its second domestic magnet manufacturing facility, the 10X Facility, expected to be operational by 2028 [2] - The DoD has established a price floor of $110 per kilogram for MP Materials' products, ensuring protection from market volatility and guaranteeing that 100% of the magnets produced at the 10X Facility will be purchased for 10 years [2][8] - The agreement with Apple, announced on July 15, involves supplying rare earth magnets made entirely from recycled materials, enhancing MP's position in the clean-tech value chain [3][8] Group 2: Financial Performance - In Q2, MP Materials produced 597 metric tons of neodymium, a 119% increase year-over-year, and REO production rose 45% to 13,145 metric tons [11] - Revenues surged 84% year-over-year to $57.4 million, but the company reported an adjusted loss of 13 cents per share due to increased costs [12] - The consensus estimate for 2025 earnings is a loss of 28 cents per share, while 2026 estimates suggest a potential turnaround with earnings of 91 cents per share [15][16] Group 3: Stock Performance and Valuation - MP Materials' shares have increased by 135.1% since July, significantly outperforming the industry and broader market indices [3][9] - The stock is trading at a forward price/sales multiple of 24.01X, indicating a premium valuation compared to the industry average of 1.46X [18] - Despite the strong performance, the company's Value Score of F suggests that the stock may be overvalued at this time [18] Group 4: Strategic Positioning - MP Materials operates the Mountain Pass Rare Earth Mine, the only large-scale rare earth mining and processing site in North America, positioning it strategically within the U.S. supply chain [18] - The company's vertically integrated operations and government-backed expansion plans enhance its significance in the rare earth sector [18][19]