MP Materials Analysis
Shares of MP Materials reached a new two-year high today following China's announcement to ban certain specialty mineral exports to the U.S. This news comes just days after President-Elect Trump’s announcement of a 10% tariff on Chinese imports, likely marking the beginning of a series of retaliatory measures between the two countries. Shares of other precious metals and mining companies also experienced an influx of buyers, as the news could boost U.S. mineral production.
MP Materials itself is a relatively small company that has been in operation for only a short time. The Nevada-based materials producer achieved impressive growth from 2020 to 2022, increasing revenue from $134 million to $527 million over three years. However, it saw a significant decline in revenue to $253 million in 2023. Overproduction in previous years, combined with rising costs and a global economic slowdown, severely impacted MP’s growth, as well as that of other companies in the industry. However, a turnaround may be imminent due to China's newly implemented export bans. A Trump presidency is expected to boost domestic production across the U.S., but it remains to be seen how specifically MP will benefit. Earnings reports will be a key indicator of their progress.
In its most recent earnings report, MP grew revenue by 19%, breaking a seven-quarter downtrend in sales. However, net income continued to decline as rising fuel costs and a volatile materials market took their toll. Despite the sales downturn, MP has grown its total assets, reaching $2.3 billion in assets against $1.03 billion in liabilities, a healthy 2:1 ratio. However, free cash flow remains negative, which is a notable weakness in the stock’s overall analysis.
Overall, MP’s current $3.82 billion valuation is still somewhat difficult to justify, but there is potential for the company to grow into it as global trade dynamics shift. MP is well-positioned to return to growth, as evidenced by recent earnings. The company projects 63% annualized growth by the end of 2025, which could attract more investors if achieved.
Technical Analysis:
The two-year high MP reached this week is noteworthy and likely to attract new investor interest. Volume suggests a continuation rally with a near-term target of $26.00–$27.00 and a more aggressive target of $35.00–$36.00.