USAR Surges 52.5% YTD: How Should Investors Play the Stock?

Core Insights - USA Rare Earth, Inc. (USAR) has seen a year-to-date stock increase of 52.5%, outperforming the S&P 500 and Zacks Mining - Miscellaneous industry growth rates of 18.7% and 29.2% respectively, but lagging behind competitors like MP Materials Corp. and NioCorp Developments Ltd. which have surged by 283.5% and 330.3% respectively [1] Stock Performance - The stock closed at $17.51, significantly below its 52-week high of $43.98 and above its 52-week low of $5.56, indicating volatility as it trades below its 50-day moving average but above its 200-day moving average [3] Financial Challenges - Despite a 52.5% increase in shares year-to-date, USAR faces challenges with higher operational expenses and no revenues, resulting in a quarterly loss as project development progresses [8] - Selling, general and administrative expenses rose to $11.4 million from $0.8 million year-over-year, driven by increased legal and consulting costs, higher headcount, and recruiting fees [10] - Research and development expenses increased to $4.45 million from $1.16 million, attributed to higher employee-related costs and other expenses, leading to a loss of 25 cents per share in the third quarter [11] Long-Term Prospects - USAR is advancing its Stillwater magnet manufacturing facility in Oklahoma, designed to produce Neodymium Iron Boron (NdFeB) magnets for various high-growth applications [12] - The facility is expected to be one of the first large-scale magnet plants in the U.S., supporting domestic rare earth supply chain efforts, with commissioning planned for the first quarter of 2026 [13] - The company is hiring and training engineers and technicians to operate the facility, which is expected to help secure long-term customer contracts [14] Capital and Acquisitions - USAR raised significant capital through PIPE financing and warrant exercises, increasing its cash position to over $400 million as of November 2025, which will be used for upgrades at the Stillwater plant and expanding magnet production capacity [15] - The acquisition of LCM, a UK-based manufacturer of specialized rare earth metals, will accelerate USAR's mine-to-magnet strategy, establishing a complete rare earth supply chain [16] Valuation - USAR is trading at a forward price-to-earnings ratio of negative 41.32X, compared to the industry average of 15.44X, while competitors MP Materials and NioCorp Developments are trading at 88.72X and negative 20.83X respectively [19] Summary of Estimates - The Zacks Consensus Estimate for USAR's bottom line for 2025 and 2026 has decreased over the past 60 days, indicating a trend of estimate revisions [17]