Rare-earth materials and rare-earth magnets are crucial to the modern economy, and China dominates the global supply of both. That statement serves as the starting point for understanding why a $100 investment in MP Materials (MP 3.66%) a year ago would be worth $329 as I write this. It also indicates where the stock could be headed next.
MP Materials’ wild year
According to the International Energy Agency (IEA), China in 2024 was responsible for 59% of the rare-earth materials mined, 91% of the refined materials, and 93% of the strongest type of rare-earth materials. China’s position provides it with significant leverage in the ongoing trade conflict with the U.S..
Today’s Change
(-3.66%) $-2.35
Current Price
$61.83
Key Data Points
Market Cap
$11B
Day’s Range
$61.13 – $63.66
52wk Range
$15.56 – $100.25
Volume
325K
Avg Vol
15M
Gross Margin
-2627.54%
Dividend Yield
N/A
With the need to secure a domestic supply of rare-earth materials, the U.S. Department of Defense (DOD) entered into a transformational agreement with MP Materials in the summer, involving $400 million worth of investment in stock, $150 million in loans, a $1 billion financing commitment from leading U.S. banks, and a 10-year price floor commitment from the DOD.
A few days later, Apple announced a $500 million partnership whereby MP Materials will supply Apple with rare-earth magnets.
These deals will help secure MP Materials’ plans to build a new rare-earth magnet production facility (known as the 10X Facility) in conjunction with expansion at its Texas facility.
Image source: Getty Images.
Where MP Materials goes next
Whether investors like it or not, the wild swings in MP Materials’ stock price are dictated by developments in U.S./China trade relations. Since rare-earth materials are still a significant leverage for China, more volatility seems assured. And the fundamentals surrounding the stock, such as assessments of future rare-earth magnet pricing in the U.S., are also influenced by political developments.
I think the stock is best avoided.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.
