President Donald Trump’s stay in Asia has great geopolitical importance, as several countries on the world’s largest continent work to reach a trade agreement with the largest economy on the planet. However, what is being watched with great expectation is a possible agreement with China.
The US president is scheduled to meet with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Summit, and rumors are rife that the two economic powers will sign a trade deal, in which China will buy more US products, such as soybeans, while allowing more rare earth exports to the US.
But why did the impending trade deal with China cause MP Materials shares to drop 7.4% yesterday?
Founded in 2017, MP Materials (MP) is the only scale rare earth mining and processing facility in the US, operating in the resource-rich terrain of the Mountain Pass Mine in California. Mountain Pass is one of the largest known deposits of rare earth elements in the world, with more than 18 million metric tons of rare earth oxide equivalent (REO) in the ground, including cerium, lanthanum, neodymium, and praseodymium, among others. These lightweight rare earth elements have several critical industrial applications, such as the construction of permanent magnets, optical lenses, and battery electrodes.
Valued at a market capitalization of $12.5 billion, MP shares have been on the rise this year (thanks mainly to the US government buying a stake in the company earlier this year), recovering 330% year to date (YTD).
So, are the thawing of US-China relations and the recent liquidation an indication that MP Materials’ prosperous days are over and investors should avoid it? Or is the correction an opportunity to boost the stock? Let’s find out.
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Unlike other loss-making companies, MP Materials’ financials are not alarming. For starters, it has real income and its losses haven’t increased in recent quarters. In fact, in the most recent quarter, the company reported improvement in both top and bottom lines.
In the second quarter of 2025, MP Materials had revenue of $57.4 million, a considerable increase of 84% from the previous year. A record production of 597 metric tons of NdPr, marking a year-on-year growth of 119%, along with a 45% increase in the same period in REO production to 13,145 metric tons, contributed to the overall sales growth. Additionally, NdPr sales volumes tripled year-over-year (YoY), reaching 443 metric tons.
In particular, NdPr stands for neodymium praseodymium, a mixture of two closely related rare earth elements that are typically mined, refined and used together due to their similar chemical properties. Both elements belong to the group of “light rare earths” and occur naturally together in minerals such as bastnäsite. NdPr is essential in the production of high-performance permanent magnets, which are used in technologies that convert electrical energy into mechanical movement.
Meanwhile, losses narrowed to $0.13 per share from $0.17 per share in the year-ago period, although they were also narrower than the consensus estimate of a loss of $0.20 per share. Additionally, this was also the fourth consecutive quarter in which the company’s losses were smaller than Street estimates.
However, net cash used in operating activities during the first six months of 2025 expanded to $66.9 million, from $10.3 million in the corresponding period a year ago. Despite that, the company’s liquidity position remained strong, with a cash balance of $261.5 million as of June 30, 2025, much higher than its short-term debt levels of $67.4 million.
MP Materials will report its third quarter 2025 results on November 6.
The US-China deal, if it comes to fruition, will definitely be a hurdle for MP Materials. However, geopolitical realities in today’s dynamic world are as fickle as can be, and it only takes one presidential term to disrupt the global economy. So, when the reality is that China controls 70% of rare earth mining and about 90% of processing, while the United States sources 70% of its rare earth imports from China, the game is far from over for MP Materials, which has forged formidable alliances with companies such as the Department of Defense, iPhone maker Apple (AAPL), and auto major General Motors (GM).
Notably, the agreement with the Department of Defense sets a 10-year floor price of $110 per kilogram for MP Materials’ NdPr starting in the fourth quarter of 2025, with the government stepping in quarterly to cover any shortfalls against the benchmark weighted average volume price.
Beyond that, the company already has a multi-year supply pact with General Motors for magnets intended for electric vehicle motors, a telltale sign of the deeper changes reshaping the sector. On another front, MP sealed a $500 million deal with Apple to supply rare earth magnets extracted from recycled fluxes for its consumer devices.
Meanwhile, the company also began large-scale refining of NdPr and began trial manufacturing of next-generation rare earth magnets at a new facility in Texas.
Therefore, MP Materials’ perfect control over the rare earth chain, from mining and separation to magnet assembly and eventual recycling, elevates it far above a typical extractive activity. In today’s tense geopolitical climate, that makes the company a critical asset to America’s security of supply.
Certainly, the recent sell-off may have rattled some investors in the stock; However, if one zooms out and takes a long-term view, this can be an excellent opportunity to load up on MP stocks. While caution should be taken when purchasing shares, which involves having reasonable exposure due to their high valuations and yet-to-be-profitable status, MP Materials should not be viewed as simply a mining company ignoring its greater importance to the Western world.
Overall, analysts remain cautiously optimistic on MP stock, giving it a “Moderate Buy” rating, with an average price target of $81.27. This indicates an upside potential of around 24% from current levels. Of the 14 analysts covering the stock, eight have a “Strong Buy” rating, one has a “Moderate Buy” rating, and five have a “Hold” rating.
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On the date of publication, Pathikrit Bose had no (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
