Is USA Rare Earth Stock a Millionaire Maker?

There is good news and bad news to consider when you look at USA Rare Earth (NASDAQ: USAR). The company's ambitious plan is to build from the ground up a comprehensive rare earth metals business that spans the entire value chain. It is making progress on its goal, but the final step could be years away.

So what should investors make of it all? Let's find out.

What does USA Rare Earth do?

Through the acquisition of Europe's Less Common Metals, USA Rare Earth now processes rare earth metals into more useful materials. That's a big step forward, because it means the company will start generating revenue. Prior to the completion of this deal, USA Rare Earth's income statement started with "operating expenses" and ended with "net loss." Most companies have revenue and earnings at the top and bottom of their income statements, respectively.

Image source: Getty Images.

To be completely fair, USA Rare Earth is an upstart business. So it's not surprising that it would be burning cash and bleeding red ink. Building a business from scratch is a costly and time-consuming endeavor. In the case of USA Rare Earth, there's another complication as well; it is building a mining and materials business. This is a very capital-intensive business to be in.

The capital investment required to find a mine site, get it approved, build and operate the mine, and then, when depleted, return the mine site to its original state is huge. The company is building the processing side of the business, basically what happens after the mining, far more quickly. The Less Common Metals purchase is one example. Another is that management expects a magnet facility in Oklahoma to be ready for "scale production in the first quarter [of] 2026."

USA Rare Earth's big development is coming sooner than originally expected

Having processing capabilities is important. However, the final step in the company's buildout is to open a rare-earth metals mine. The good news is that USA Rare Earth just announced that the mine would be completed two years earlier than originally planned. The bad news is that the new plan still calls for commercial production to start no sooner than late 2028.

This is hardly bad news, but it speaks to the company's still early stage of development. It also makes the balance sheet materially more important to monitor, since paying to build the mine will be a huge cash drain. USA Rare Earth isn't hurting for cash -- it ended the third quarter of 2025 with $258 million in cash on hand. Actions taken after the quarter's end increased that total to $400 million.

Still, building a mine is a complex process, and investors must be prepared for potential delays and cost overruns. The truth is, the next step is simply completing the pre-feasibility study. That is expected to be done by the end of 2026. Investing in USA Rare Earth today is a huge bet on the success of the expensive and difficult process of building the rare-earth metals mine that will complete the buildout of the company's business.

There is considerable excitement surrounding rare-earth metals at present. That excitement led to a brief rally in USA Rare Earth's stock price up to $38. It is currently sitting near $18, which is a sign of the risk investors face from owning this stock. News flow and investor emotions will be huge factors until it is a sustainably profitable business. Only the most aggressive investors should consider buying USA Rare Earth today.

Is this a millionaire-maker stock?

It is entirely possible that USA Rare Earth is a millionaire-maker stock. Rare-earth metals are becoming increasingly important, and demand is expected to remain strong. If USA Rare Earth builds out its end-to-end business model, there is material upside potential. The problem is that completing the final step, a rare-earth mine, is years away, and the cost will be substantial. A lot could go wrong along the way. Even aggressive investors should probably tread with caution here, despite a genuinely exciting story.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.