MP Materials (MP, Financial) has been on a tear, surging 255% in 2025 as momentum builds behind America's push to reclaim control of rare earths. The company secured a $500 million magnet deal with Apple (AAPL, Financial), a multi-hundred-million-dollar equity stake from the Pentagon, and over $1 billion in financing from Wall Street. On top of that, the Department of Defense is backing MP with a $150 million loan and has agreed to buy magnets at a floor price of $110/kg, with room for MP to sell the excess to auto and tech firms. These tailwinds could unlock a tenfold increase in magnet output β a bet on U.S. supply chain resilience and the growing demand for neodymium-praseodymium (NdPr) used in EVs, smartphones, and missiles.
But for all the hype, the bear case is worth paying attention to. MP still posted a $23 million loss in Q1 despite a 25% revenue bump, and its dependence on Shenghe Resources β which made up 60% of revenue β adds geopolitical complexity. While MP has made real strides in technical capabilities, including mastering grain boundary diffusion, analysts at Jefferies warn China still holds key cards: cheaper labor, abundant raw materials, toxic waste infrastructure, and the ability to flood the market to control prices. In fact, a similar price war in 2022 sent rare earth prices down 80%. Jefferies downgraded the stock to Hold last week, calling the risk/reward "neutral, at best" even under optimistic projections.
The upside isn't small β mid-cycle earnings could grow to $650 million, or even hit $1.5 billion with an ambitious build-out. But hitting those numbers may require up to $4 billion in fresh capital. Right now, the market seems to be baking in 25β30% returns on future investments and applying a discount rate that may be too generous. TipRanks data shows the stock could be 26% overvalued despite eight analysts calling it a Strong Buy. With so much riding on execution, MP may still have room to run β but the margin for error is narrowing.
