MP Materials is the IBD Stock of the Day. The rare earth minerals miner is passing a buy point, but still faces a key challenge. MP stock rallied on Monday.
Rare earth elements might sound like something out of a video game quest, but these minerals are a key in the production of smartphones, computers and other electric devices. The group of 17 elements is also crucial for the switch to green energy and is needed in the production of wind turbines and electric vehicles.
China dominates the market in rare earth elements, producing over 60% of the world's supply in 2021, according to S&P Platts, citing U.S. Geological Survey data.
There are major national security concerns with the majority of global rare earth elements coming out of China, and mining companies are looking for alternate sources.
Russia holds the world's fourth largest rare earths reserves. It is the seventh-largest producer, and a big supplier for Europe. The conflict in Ukraine could weigh on Russia's exports if more sanctions are imposed. That could further add another hurdle for Europe in its green energy goals.
While Europe has no rare earths production, the U.S. accounts for 15% of global output. MP Materials owns and operates Mountain Pass in California, the only integrated rare earth mining and processing site in North America, according to the company.
However, the country isn't completely free from China's rare earth dominance. Its mixed rare earth concentrate requires further processing. and for that, MP's mined earths are sent to China. But MP Materials plans to restart integrated processing facilities at the Mountain Pass site, following this year's projected completion of its facility optimization project.
MP Stock
Shares rose 4.4% to 49.10 on the stock market today. MP stock is breaking out of a cup-with-handle base with a buy point of 47.40. Volume on the breakout settled to 30%, just below the 40% minimum you would like to see to confirm a breakout.
The relative strength line, which tracks performance vs. the S&P 500 index, is close to a 12-year high. That can be a bullish sign, corroborating a breakout.
But MP stock still remains below long-term resistance in the 51-to-53 price range. Pushing past 53 and cracking that resistance would clear a major hurdle for the stock.
MP Materials reported fourth-quarter results that topped Wall Street estimates in February. MP stock went public in November 2020 through a special purpose acquisition company, Fortress Value.
MP has a perfect 99 Composite Rating. But it has a weaker EPS Rating of 70. The Composite Rating compiles scores on key fundamental and technical metrics: earnings and sales growth, profit margins, return on equity, and relative price performance. Investors should generally focus on stocks with a Composite Rating of 90 or higher.
MP is the leading stock in IBD's Mining-Metal Ores group.
Follow Gillian Rich on Twitter at @GillianRich_ for energy news and more.
