Why MP Materials Stock Powered Almost 53% Higher in June

Bouncing back from a disappointing performance in May, shares of rare earths producer MP Materials (NYSE: MP) raced considerably higher last month. According to data provided by S&P Global Market Intelligence, MP Materials stock rose 52.7% in June.

In addition to the ongoing trade dispute with China -- of which rare earths are a focus -- positive commentary from analysts contributed to the stock's rise.

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News from both Washington and Wall Street wound up investors' excitement last month

Early in the month, the lack of an agreement between President Trump and President Xi with respect to rare earths exports from China (as well as tariffs) suggested to investors that MP Materials, a California-based producer of rare earths, would benefit. This complemented President Trump's executive order from March that sought to shore up the nation's supply of critical minerals, such as rare earths.

Later in the month, analysts' auspicious takes on the rare earths producer's stock provided another source of motivation to click the buy button. On June 11, Thefly.com reported that Morgan Stanley maintained a $34 price target on MP Materials stock predicated on the news that officials from the U.S. and China seemed closer to reaching a truce on the trade war. The following day, shares of MP Materials closed 13.9% higher.

About a week later, Baird upwardly revised its price target on MP Materials stock to $38 from $30, maintaining an overweight rating. Baird's price target implied upside of almost 10% based on the stock's closing price the day before the price target was reported.

Should rare earths investors now watch from the sidelines after the stock's lofty rise?

Looking at the stock's recent rise, potential investors may look to its valuation to gain a better handle on whether now's a good time to pick up shares. Since the company is unprofitable, however, traditional valuation metrics are not useful. Despite this, patient investors with a stomach for volatility would be wise to dig deeper into this rare earths producer.

In addition to producing rare earths, MP Materials is working on expanding into rare earth magnets production at its facility in Texas, where it projects commercial magnet production will commence before the end of 2025. Should MP Materials achieve this feat, it will serve as an inflection point in its growth and help the company considerably on its path to profitability.

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.