Morgan Stanley Backs MP Materials as Top Rare Earth Play-but Is the Retail Investor Hearing the Full Story?

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

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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 considered national security assets, and MP Materials, operator of the only active rare earth mine in the United States, 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.

Morgan Stanley also notes MP’s plans to enter the rare earth magnet business, which is critical for electric vehicles, wind turbines, and robotics. If successful, this would make MP not just a miner but a full-spectrum domestic supplier.

Notably, the investment bank recognizes that President Trump’s move to loosen Defense Production Act (DPA) restrictions could allow federal agencies to purchase rare earths at above-market value, effectively providing 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 a trivial matter. Retail investors need to understand that MP’s business model remains capital-intensive and deeply reliant on policy support, 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 from China certainly is not a fair market.

In a recent piece on this topic authored by CNBC, (opens in a new tab) there is no mention of the fact that MP has, up until recently, still shipped partially processed material to China for final separation—a strategic vulnerability that the U.S. government has repeatedly flagged.  The company, since the intensification of the trade war, announced it would stop doing this.

However, as we have often seen with mass media, popular articles about rare earth elements often fail to address broader system-level risks. For example:

• No discussion of global rare earth price volatility.
• There is no serious acknowledgment that downstream magnet markets are still dominated by Japan, Germany, and China, not just China alone.
• No warning is given that MP’s transition from miner to magnet-maker involves major technological and operational hurdles, and 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 the successful execution of highly technical manufacturing transitions in partnership with GM.

A more comprehensive paradigm would include not just a single equity pick, but a systems-based investment view, factoring in magnet production IP, processing technology, 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 with their eyes wide open.