MP Materials is poised to gain from a growing market for rare earth products, according to JPMorgan. Analyst Bill Peterson initiated coverage of the rare earths mine operator at overweight with a $27 price target. Peterson’s price target implies shares can rise 32.8% from Wednesday’s close. The stock has pulled back despite the price of neodymium praseodymium alloy climbing about 8% this quarter. Peterson said the company can benefit from the higher prices, which are expected to continue rising over the next several years due to cost support from China — which has an outsize influence on the supply chain — and lagging supply. “MP is well positioned to take advantage of a strengthening market for NdPr as it should be one of the lowest-cost producers in the world and an attractive partner for customers looking to secure a domestic source of supply,” he said in a note to clients Thursday. Supply for neodymium praseodymium should be stagnant without new projects planned outside of China. Meanwhile, Peterson said demand could approximately double by 2030 as electric vehicles and wind turbines — both of which can utilize rare earth magnets from the alloy — gain favor. MP is starting to produce the oxides of neodymium praseodymium from the concentrate it has long mined with the first shipments expected this quarter. The company also has expectations for producing rare earth magnets itself by 2025, which Peterson said could push the stock’s multiple higher than peers. The U.S.-based company is also increasingly attractive as geopolitical rifts with China, a major supplier in the rare earth supply chain, escalate. MP is considered one of only two “sizable” producers of rare earth oxides outside the country by Peterson’s count. “We believe MP’s products will provide strategic appeal with its promise of security and an eco-friendly footprint,” Peterson said. MP shares climbed 3.3% in early trading Thursday. Still, the stock has dropped about 16.3% this year. MP YTD mountain MP Materials, year to date — CNBC’s Michael Bloom contributed to this report.
