Why USA Rare Earth Stock Keeps Going Up

USA Rare Earth (NASDAQ: USAR) stock jumped for a second straight day Friday after Roth Capital doubled its price target on the rare earth mining start-up company, to $40 per share.

USA Rare Earth shares closed near $31 last night, but are up 5.3% through 10:45 a.m. ET today.

Image source: Getty Images.

Roth Capital loves USA Rare Earth stock

Yesterday, Roth analyst Suji Desilva thought USA Rare Earth stock was worth only $20; today, $40.

Why the change? The Fly ascribes Desilva's optimism to meetings held with management, and evidence of "progress toward establishing an alternative, end-to-end rare earth magnet manufacturing supply chain based outside of China in the U.S. and allied countries."

This became more urgent yesterday when China announced new export controls on products containing rare earths originating in China. According to The Wall Street Journal, China's aim is to pressure President Trump in trade negotiations, and the new regulations specifically target rare earths that make up as little as 0.1% of the value of semiconductors -- or even equipment used to manufacture semiconductors.

Is USA Rare Earth stock a buy?

Now here's the problem: America has a rare earths problem. We need these metals to make high-tech stuff, and we don't produce enough of them here at home.

USA Rare Earth wants to help solve that problem by mining and refining and turning into magnets rare earths here at home.

Problem is, USA Rare Earth's solution lies years in the future. It's not expected to begin generating revenue until next year, nor profits before 2028. By then, the trade war may have resolved itself, and any rare earths USA Rare Earth produces will not be price competitive with what China is selling.

USA Rare Earth remains a speculative stock. Reexamine your risk tolerance before buying it.

Rich Smith 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.