Energy Fuels Inc. (NYSE:UUUU) and MP Materials Corp. (NYSE:MP) are two popular rare earth stocks that investors may consider amid the growing demand for rare earth metals. The rare earth minerals are essential for the development of modern technologies, including smartphones, clean energy, electric-vehicle batteries, consumer electronics, health care, hard drives for computers, and magnets for weapons-guidance systems. New laws aimed at eliminating U.S. reliance on China for these metals will likely bolster U.S.-based rare earth stocks.
U.S. Increases Focus on Rare Earth Minerals Mining
China currently leads the global supply chain as it has profoundly invested in building the infrastructure and capacities for mining and refining rare earth minerals. The world’s largest economy is dependent on China for about 80% of rare-earth elements.
Considering that the United States is making significant strides to reduce its dependency on sourcing raw materials or finished goods from China, the country is taking initiatives to significantly boost its mining and processing capacity of rare-earth minerals.
The U.S. government aims to spend multi-billion dollars to enhance the competitiveness of the United States in mining and processing rare earth elements.
Even American defense contractors are gradually lowering their reliance on Chinese microelectronics and specialty metals as a result of pressure from the Pentagon and politicians. In fact, legislation banning the use of Chinese rare-earth materials after 2027 may be passed during the next defense authorization act, according to a WSJ report.
Let’s delve deeper into how Energy Fuels and MP Materials can be the right choices to earn handsome returns from investing in the space.
Energy Fuels (NYSE:UUUU)
With a market cap of $1.03 billion, Energy Fuels is increasing the full commercial-scale manufacturing capacity of High-purity mixed rare earth element (REE) carbonate. The company has recently started partial commercial-scale REE separations at its White Mesa Mill by utilizing its existing facilities.
Notably, Energy Fuels is a uranium mining company. This U.S.-based company supplies triuranium octoxide (U3O8) to major nuclear utilities. It also manufactures vanadium from some of its projects.
In the recently reported earnings results, the company said supply and demand fundamentals in the underlying market indicate that prices will remain high in the future.
Is UUUU Stock a Good Buy?
As of now, UUUU stock seems like a good investment option. Turning to Wall Street, analysts are highly confident about UUUU stock, which enjoys a Strong Buy consensus rating based on five Buys.
Notably, shares of UUUU stock have declined 23.3% so far in 2022, which represents an opportunity for investors to buy the dip. Energy Fuels’ average price target of $10.19 signals that the stock may surge nearly 56.5% from current levels.
TipRanks data shows that financial bloggers are 100% Bullish on Energy Fuel, compared to the sector average of 74%.
MP Materials (NYSE:MP)
MP Materials is the largest producer of rare earth materials in the Western Hemisphere. With a market cap of $5.57 billion, the company owns and operates the Mountain Pass Rare Earth Mine and Processing Facility.
The company has bagged a $35 million contract in early 2022 through the U.S. Department of Defense Industrial Base Analysis and Sustainment Program. The contract has been awarded to support the construction of a commercial-scale processing facility for heavy rare earth elements (HREE) at Mountain Pass.
MP Materials has successfully delivered an earnings surprise in all the trailing quarters in the last couple of years. If the trend persists, it can provide strong support to its share price performance in the coming quarters.
The company witnessed 96% growth from the prior year in revenues on the back of the higher realized price of rare earth oxide (“REO”) in concentrate in the second quarter of 2022.
Is MP Materials Stock a Buy?
MP Materials stock appears to be a lucrative option to invest money in. According to TipRanks, the Street is optimistic about MP stock and has a Strong Buy consensus rating based on six Buys.
Similarly, TipRanks data shows that financial bloggers are 100% Bullish on MP stock, compared to the sector average of 74%.
However, shares of MP stock have declined 34.1% so far in 2022, which represents a great long-term buying opportunity for investors. Furthermore, MP stock’s average price forecast of $48.42 implies a 54.3% upside potential to current levels.
Conclusion: Dig into Rare Earth Stocks as Prospects Look Bright
There is no denying the fact that the world is witnessing growing awareness and surging demand for clean energy and electric vehicles. This should keep the demand for rare earth metals elevated as well. In such a scenario, the U.S. government’s efforts to ramp up mining and processing efforts should support the players in the space. Against this bullish backdrop, investors can consider Energy Fuels and MP Materials as their stocks have over 50% upside potential from their current levels.
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