MP Materials Stock Hits New High As Apple Deal Boosts Sentiment

MP Materials (NYSE: MP), the sole operator of a rare earths mine in the United States, is experiencing a meteoric rise, fueled by a landmark $500 million agreement with Apple to supply rare earth magnets and bolstered by ongoing support from the U.S. Department of Defense (DoD).

The MP Materials stock price is trading up a further 4% in the pre-market session, adding to yesterday's impressive 19.99% surge. The stock price has seen an 86.3% increase over the past week alone. Trading volume is exceptionally high, exceeding 74 million shares, indicating intense investor interest and speculation.

The deal with Apple is undoubtedly transformative. It secures a major customer for MP Materials' output and validates its position as a critical player in the U.S. supply chain. Apple’s investment will facilitate the development of a recycling facility at Mountain Pass, California, and expand MP Materials' facility in Fort Worth, Texas. Scheduled to begin production in 2027, the initiative aims to create magnets from recycled rare earth elements, showcasing a commitment to sustainable sourcing. Tim Cook, Apple’s CEO, has emphasized the partnership's importance in reinforcing the domestic supply chain for essential materials.

Complementing the Apple deal is the DoD's continued investment in MP Materials. The Pentagon, now a major shareholder, has committed $400 million to the company as part of a broader strategy to reduce reliance on foreign sources, particularly China, which dominates over 90% of global rare earth magnet production. This commitment includes financial backstop measures and a 10-year price guarantee on key rare earth elements like neodymium and praseodymium, providing MP Materials with a stable revenue stream and mitigating price volatility risks.

The market's response has been overwhelmingly positive. MP Materials' stock has soared, reaching multi-year highs, and community discussions are buzzing with speculation about future partnerships with other tech giants and defense contractors. The narrative of a resurgent American rare earth industry, spearheaded by MP Materials, is gaining traction. However, caution is warranted.

While the long-term potential is undeniable, several factors temper the bullish enthusiasm. The stock's historical volatility, reflected in its high beta of 2.26, suggests it is prone to significant price swings. Furthermore, analysts' average 12-month price target of $29.80 is significantly below the current price, indicating that current valuations may be overextended, and analysts haven't adjusted their models to account for the Apple and DoD deals.