Here's Why MP Materials Blasted Higher Again This Week

Key Points

• The necessity to secure a reliable domestic supply of rare earth materials is driving MP Materials stock higher.

• A deal with Apple followed a landmark agreement with the Department of Defense.

• 10 stocks we like better than MP Materials ›

Shares in rare-earth materials and magnets company MP Materials (NYSE: MP) blasted higher by 33.6% in the week to Friday morning.

Why MP Materials surged again this week

It's not hard to see why the stock has surged this year. The ongoing need to secure domestic provision of rare earths and the growing trade conflict with China (the country produces about 70% of global rare-earth elements) is driving the U.S. administration, via the Department of Defense, to enter into a partnership with MP Materials.

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The $400 million investment in stock from the DOD, a $150 million loan, and an agreement to ensure the purchase of magnets produced from a facility that MP Materials will build with the help of committed financing, provide substantive backing to the company's growth plans.

But that was last week. On Tuesday, MP Materials announced an agreement with Apple, whereby it will pay $500 million (with $200 million prepaid) for rare-earth magnets under a long-term supply agreement. The magnets will be produced at a facility in Texas that MP Materials will expand.

Image source: Getty Images.

The news sent the stock racing higher, and a public offering of stock worth $500 million on Wednesday received such interest that management raised it to $650 million the next day. This is a company on a roll, but substantive execution and political risk remain over the long term.

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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.