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Photo illustration by Cheng Xin/Getty Images Getty Images MP Materials (NYSE:MP), a rare-earth materials company, has experienced a nearly 10% decline in its stock price over the last five trading days and is down approximately 30% from its peak on October 14, when China imposed additional restrictions on certain rare-earth exports. This drop occurs in the context of optimism surrounding a possible U.S.-China trade agreement, with President Donald Trump and Chinese President Xi Jinping scheduled to meet in South Korea on Thursday. Earlier this month, rare-earth stocks, including MP Materials, experienced a surge after Beijing enforced tighter export controls on 12 out of the 17 rare-earth elements, raising hopes for increased U.S. demand and policy support. However, with diplomatic discussions currently in progress, investor enthusiasm has waned. What is the future direction for MP Materials stock? Recently, MP stock has shown a significant increase, yet we currently consider it unappealing. While this may sound like a warning, there is considerable risk in depending on a single stock. Nevertheless, there is substantial value in the broader, diversified approach we take with the Trefis High Quality Portfolio. Additionally, consider what long-term performance could look like for your portfolio if you combined 10% commodities, 10% gold, and 2% crypto with equities. Still A Highly Strategic Asset Despite the recent pullback, MP Materials continues to be a key player in the United States’ critical minerals initiative. The company operates the Mountain Pass Mine in California — the only active rare-earth mine and processing facility in the country — focusing on the production of Neodymium-Praseodymium (NdPr), which is crucial for high-strength magnets used in electric vehicles, wind turbines, and defense systems. Earlier this year, the U.S. Department of Defense became MP's largest shareholder after investing $400 million in equity to ramp up magnet production. MP also secured a $500 million supply agreement with Apple, financing the construction of its new Independence facility in Texas, which will manufacture finished rare-earth magnets. In the second quarter of 2025, MP reported record output of NdPr oxide, which increased 119% year-over-year, with sales volumes tripling. Revenue soared 84% to $57.4 million, and management is optimistic about further production increases. Q3 earnings are anticipated in early November and should provide investors with additional insights into the scaling of operations. The company aims to increase magnet production to 10,000 metric tons per year by 2028, which could lead to improved margins over time. A Broader Investment Wave China has largely controlled the global rare earth market, producing and processing between 70% to 90% of rare earth magnets essential for various advanced technologies. In contrast, U.S.-based rare earth firms have generally struggled to secure substantial amounts of capital due to their weaker standing against Chinese mineral companies, which benefit from government backing and have supplied global markets with low-cost materials. MORE FOR YOU However, the rare-earth industry is undergoing a transformation. Since China began imposing export restrictions in April — causing prices to skyrocket and disrupting automotive production — Western governments and private investors have invested billions in the sector. For instance, Orion Resource Partners announced a $1.8 billion consortium, partially funded by the U.S. government, to ensure supplies for the United States and its allies. Banking giant JPMorgan Chase has expressed intentions to invest $10 billion in strategic industries related to national security, including rare-earth companies. Expect Policy To Favor Companies Like MP Even if a trade agreement with China comes to fruition, it is improbable that the U.S. will regard China as a trustworthy rare earth supplier again, and the pursuit to decrease U.S. reliance on Chinese supplies is expected to persist. Reports suggest that the U.S. government has agreed to establish a price floor for MP Materials, shielding it from any potential price collapse caused by excessive Chinese production. This safety net reinforces MP's position as the leading player in America's rare-earth strategy, mitigating its downside risk and ensuring greater earnings stability even if global prices decline. What Are The Risks? Despite solid fundamentals and policy backing, valuation presents a challenge. MP trades at approximately 40 times its forward revenue, a figure more common among high-growth tech companies than among miners. The business is still unprofitable, reporting a $53.5 million net loss year-to-date and depleting around $126 million in cash. Furthermore, the growth of the sector is still in its early stages, and the company may encounter execution challenges ahead, indicating that it could take a considerable amount of time to align with its premium valuation. The Trefis High Quality (HQ) Portfolio, featuring 30 stocks, has a history of comfortably outperforming its benchmark, which includes all three indices – S&P 500, Russell, and S&P Midcap – achieving returns exceeding 105% since its inception. What accounts for this? As a group, HQ Portfolio stocks have delivered superior returns with lower risk compared to the benchmark index; providing a smoother ride, as demonstrated in HQ Portfolio performance metrics. Editorial StandardsReprints & Permissions
