Investment Banks Keep Raising Their Price Target on This Rare-Earth Mining Stock. Time to Buy?

The U.S. is making a strong push to secure domestic rare-earth mining and processing. This move is primarily fueled by the fact that China currently dominates the global market, controlling a staggering 70% of mining and 90% of processing, giving the country considerable influence in international negotiations.

The U.S. entered into a historic arrangement with MP Materials (NYSE: MP) last year, investing in the company to help it ramp up its processing capacity while also providing it with price floors for its critical magnets. Over the past month, several investment banks have raised their price targets on the company. Here's what investors need to know.

MP Materials' recent earnings results impressed Wall Street

MP Materials is the only fully integrated Western rare-earth producer that also owns the largest rare-earth mine in the U.S. at Mountain Pass. Last year, the company entered into a landmark public-private partnership with the U.S. government to purchase its neodymium-praseodymium (NdPr) products, which are used in critical rare-earth magnets for electric vehicles, robotics, and defense.

As part of this agreement, the U.S. established a price floor of $110 per kilogram for MP's NdPr products that are stockpiled or sold. This price floor is unusual but is seen as necessary, given that China heavily subsidizes state production of rare-earth elements. By instituting a price floor, the U.S. is locking in a price at which it will buy MP's products, preventing the company from being undercut by foreign competitors.

Image source: Getty Images.

MP Materials' first-quarter earnings results caught the attention of Wall Street, and for good reason. In the quarter, the company earned $90 million in revenue, smashing analysts' forecast of $70 million. Meanwhile, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose from negative $2.7 million last year to positive $36.6 million. Following its announcement, several investment banks raised their price targets:

• Goldman Sachs to $80 from $71
• Morgan Stanley to $70 from $62
• Deutsche Bank to $70 from $65
• Wedbush to $100 from $90

Analysts are beginning to view MP Materials less like a pure mining story and more as an integrated manufacturing platform. In the quarter, MP announced that NdPr production volume increased 63% year over year, while sales surged 117%.

Buying MP Materials is a bet on the U.S. production of rare earths

Analysts covering MP Materials' stock project non-GAAP (generally accepted accounting principles) earnings per share of around $0.23 this year, an improvement from last year's loss of $0.38 per share. They also project strong growth, with EPS of $1.10 in 2027 and $1.68 in 2028, showing the strength of the mining company's platform and price floors supporting it.

Looking forward, the company selected Northlake, Texas, for its future 10X facility, where it aims to increase production capacity to 10,000 metric tons of NdFeB (neodymium-iron-boron) rare-earth magnets per year. This would help the U.S. achieve supply independence for the crucial magnets and reduce reliance on China entirely. MP is targeting 2028 for the facility's operational start.

With the U.S. in desperate need of rebuilding its rare-earth mining and processing capabilities, MP Materials is a top rare-earth stock you can own today to capitalize on this trend.

Courtney Carlsen has positions in Goldman Sachs Group, MP Materials, and Morgan Stanley. The Motley Fool has positions in and recommends Goldman Sachs Group and MP Materials. The Motley Fool has a disclosure policy.