Highlights
- MP Materials is the only active rare earth mine in the U.S.
- Positioned as a critical national security asset with significant geopolitical advantages
- Aims to transition from mining to full-spectrum rare earth magnet production
- Supported by potential government incentives and defense procurement strategies
- Investors should view MP Materials as a policy-driven investment with complex technological and operational challenges in the rare earth sector
In a high-profile analyst call, Morgan Stanley upgraded MP Materials to a “buy” rating, setting a $34 price target—roughly 32% above current levels. The bank is framing MP as the single best-positioned rare earth investment in North America, thanks to its vertically integrated operations and rising geopolitical tailwinds. And frankly it would be hard to disagree. Right now the company is priced at $25.70.
Behind the bullish headlines, retail investors should read between the lines.
What Morgan Stanley Gets Right
The firm highlights the core reality: rare earths are now national security assets, and MP Materials—operator of the only active rare earth mine in the U.S., Mountain Pass—is uniquely positioned. With China restricting exports of seven key rare earth elements and tensions rising in the Trump-Xi trade standoff, supply chain resiliency has become a top priority for the White House.
MorganStanley also notes MP's plans to enter the rare earth magnetbusiness—critical for electric vehicles, wind turbines, and robotics. If successful, this would make MP not just a miner, but a full-spectrum domestic supplier.
Importantly, the investment bank recognizes that President Trump’s move to loosen Defense Production Act (DPA) restrictions could allow federal agencies to purchase rare earths above market value—effectively a subsidy to onshore production. MP Materials is best positioned to benefit.\
Where the Framing Falls Short
While Morgan Stanley notes negative free cash flow through 2026 and a pivot to positive territory by 2027, this is not trivial. Retail investors need to understand that MP’s business model remainscapital-intensive and deeply reliant on policysupport—particularly in the midstream (separation) and downstream (magnet manufacturing) segments. And that’s a dynamic we support. This sort of policy is necessary because the competition out of China certainly is not fair market.
In the recent piece on this topic authored by CNBC (opens in a new tab) there’s no mention of the fact that MP has up until recently still shipped partially processed material to China for final separation—a strategic vulnerability the U.S. government has flagged repeatedly. The company since the intensifying trade war announced it would stop doing this.
But as we have often seen with mass media popular articles about rare earth elements, they mostly fail to grapple with broader system-level risks. For example:
- No discussion of global rare earth price volatility.
- No serious acknowledgment that downstream magnet markets are still dominated by Japan, Germany, and China, not just China alone.
- No warning that MP’s transition from miner to magnet-maker involves major technological and operational hurdles, that they are still in the early stages. Again Rare Earth Exchanges has referred to MP Materials as America’s treasure trove.
Critical Takeaway for Retail Investors
Yes, MP Materials may be the best U.S.-listed vehicle to play the rare earth reshoring trend. But that trend is political, fragile, and slow-moving.
Retail investors must recognize that MP’s future is tethered to government incentives, defense procurement, and successful execution of highly technical manufacturing transitions in partnership with GM.
A more complete paradigm would include not just a single equity pick, but a _systems-based investment view_—factoring in magnet production IP, processing tech, recycling innovation, and global alliances. That means following companies in Australia, Japan, and Canada, as well as U.S. public-private partnerships.
Conclusion
Morgan Stanley’s upgrade is credible, but incomplete. MP Materials may indeed be a top U.S. pick—but not a pure market play. It’s a bet on policy, not just production. Retail investors should invest eyes wide open.
Leave a Reply