A wheel loader operator fills a truck with ore at the MP Materials rare earth mine in Mountain Pass, California, January 30, 2020.
Steve Marcus | Reuters
The rare-earth miner MP Materials will enjoy growing strategic value to the U.S., as geopolitical tensions with China make the supply of critical minerals more uncertain, according to Morgan Stanley.
The investment bank upgraded MP Materials to the equivalent of a buy rating with a stock price target of $34 per share, implying 32% upside from Friday’s close.
MP Materials owns the only operating rare earth mine in the U.S. at Mountain Pass, California. China dominates the global market for rare earth refining and processing, according to Morgan Stanley.
“Geopolitical and trade tensions are finally pushing critical mineral supply chains to top of mind,” analysts led by Carlos De Alba told clients in a Thursday note. “MP is the most vertically integrated rare earths company ex-China.”
Beijing imposed export restrictions on seven rare earth elements in April in response to President Donald Trump’s tariffs. It has kept those restrictions in place despite trade talks with U.S.
Trump removed some restrictions Wednesday on the Defense Production Act, which could allow the federal government to offer an above market price for rare earths. MP Materials is the best positioned company to benefit from this, according to Morgan Stanley. Its shares rose more than 5% on Thursday.
MP Materials is developing fully domestic rare earth supply chain in the U.S. and plans to begin commercial production of magnets used in most electric vehicle motors, offshore wind wind turbines, and the future market for humanoid robots, according to Morgan Stanley.
The investment bank expects MP Materials to post negative free cash flow this year and in 2026, but the company has a strong balance sheet should accelerate positive free cash flow from 2027 onward.