Al Root

Shares of MP Materials took a breather on Monday after catching a slightly strange Wall Street downgrade.

The stock was off 0.8% in midday trading at $73.75 while the S&P 500 was down 0.1% and the Dow Jones Industrial Average was down 0.4%.

Catalyzing the dip was a downgrade by CFRA analyst Matthew Miller, who lowered his rating slightly to Buy from Strong Buy.

Analysts and brokers use a variety of labels for their ratings. A downgrade to Buy is a bit of an odd downgrade, but Miller's view is a little more muted than it was before. Still, he raised his target price for the stock to $88 a share from $20, for a gain of 340%.

The average target price for MP stock among Wall Street analysts tracked by Bloomberg has been rocketing higher in recent weeks, rising to almost $70 a share from about $30 at the start of July.

Catalyzing the changes was a blockbuster deal with the Defense Department that will transform MP's capacity and profitability in the years to come.

The agreement includes an initial $400 million equity investment by the Pentagon in the Las Vegas-based rare earth minerals producer, plus a commitment for up to $350 million in additional funding, and a $150 million loan from the Pentagon, according to regulatory filings. The money will fund the construction of a new domestic magnet-manufacturing facility, which the company dubbed the 10X facility, and the expansion of MP Materials' current mining and processing capabilities.

MP's annual rare earth magnet making capacity will rise to roughly 10,000 metric tons a year by the end of the decade. The old target, before the DoD investment, was about 3,000 metric tons annually.

Rare earth materials end up in things such as magnets for electric motors and in navigation equipment. Today, China dominates rare earth metals, controlling some 85% of global refining capacity.

In 2024, the Defense Department published its National Defense Industrial Strategy, which includes a "mine to magnet" plan for rare earths that aims to make the DoD self-sufficient by 2027.

MP Materials is the largest producer of rare earths in the Western Hemisphere, making neodymium and praseodymium oxides, two rare earth elements among a list of more than a dozen.

In 2025, MP is expected to generate about $15 million in earnings before interest, taxes, depreciation, and amortization, or Ebitda. Profitability will grow significantly in the coming years. The company expects about $650 million when new facilities are up and running a few years from now.

"We now view the $650 million Ebitda as a floor, and when accounting for commercial sales from the 10X facility and additional Neodymium-Praseodymium products from heavy rare earths," wrote Miller. "We arrive at a pro forma Ebitda of $850 million, [which] could prove to be a conservative estimate if NdPr prices rise significantly above the $110/kg floor guaranteed by the DoD."

He's still bullish, just not as bullish as before. MP's stock performance helps explain the change. Coming into Monday trading, MP stock was on a tear, up about 211% over the past three months.

The downgrade doesn't change the Buy-rating ratio for the stock. About 69% of analysts covering the company rate shares Buy, according to Bloomberg. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

Write to Al Root at allen.root@dowjones.com

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August 11, 2025 14:16 ET (18:16 GMT)

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