MP Materials Stock an Opportunistic Rare Earths Pullback Play

Nevada-based rare earth miner MP Materials NYSE: MP stock has been rebounding with the rise of rare earths materials pricing. The largest operating U.S. miner of rare earth oxides (REO) in the western hemisphere is a pure-play on electric vehicles (EV) and sustainable energy as its magnets supply 15% of the world’s demand. These are critical in the function of wind turbines, drones, robotics and powertrains. The Company is an infrastructure play on building its supply chain of rare earths elements to minimize reliance on China. However, they are still sending rare earths to China for processing. The Company plans to construct its own onsite processing facilities. Acceleration of COVID vaccinations means a return to normal. The Company has become profitable and is pursuing its Stage II production. Risk-tolerant investors looking to bet on a U.S. rare earths producer can watch for opportunistic pullback levels on MP Materials.

Q1 2021 Earnings Release

On May 6, 2021, MP Materials released Q1 2021 results for the quarter ending in March 2020. The Company reported adjusted earnings per share (EPS) of $0.09, excluding non-recurring items, versus consensus analyst estimates for $0.08, a $0.01 beat. Revenues grew 189% year-over-year (YoY) to $60 million, beating estimates for $44.51 million. Net income rose 737% YoY to $16.1 million and adjusted EBITDA grew 537% YoY to $33 million.

CEO Comments

MP Materials CEO James Litinsky stated, “Our solid first-quarter results demonstrate our continued strong operational execution along with the upside our business has from higher rare earth prices. MP’s revenues nearly tripled and Adjusted EBITDA increased over 6 times compared to last year’s first quarter. Importantly, our Stage II optimization plan is on track, and we are making steady progress on our Stage III vision. During the first quarter, we issued one of the largest green bonds in the country while maintaining our conservative capital structure via a significant net cash position. This demonstrates our continued commitment to positioning MP as a Western champion of the electrification and sustainability revolution. As we continue along with our strategic roadmap, we remain laser-focused on execution and creating value for shareholders.”

Conference Call Takeaways

CEO Litinsky set the tone, “First, as we talked about last quarter, we are seeing activity accelerate in the electrification and de-carbonization supply chain, particularly related to EVs. The scale of the global acceleration and capital investment is mind-boggling. A recent IEA report stated that while it took 10 years to reach 10 million EVs on the road in 2020, they expected that over the next 10 years, by 2030, this number would climb to 145 million. This may seem like staggering growth, but that would only be about 7% of the global fleet.” He detailed Stage II production, “Stage II production means we will enjoy that massive uplift of refined product revenue without creating an incremental global supply of separated NdPr. Our revenue in a given quarter is obviously a function of sales volumes and pricing. There can be modest timing differences between production volumes and sales volumes over time, particularly due to shipping… Last quarter, we covered some details of our optimization plan, including CapEx and how we believe we significantly de-risk Stage II relative to last year. We made a lot of continued progress during the quarter. We completed the pre-civil site work. The foundation work for critical new equipment is in progress. The fabrication of the roaster is nearly complete with delivery expected very soon.” The Company produced nearly 39,000 metric tons of rare earths at $1,475 per metric ton. He concluded, “Companies are now competing for the kinds of scarce resources that are exactly what we have at MP. This is why you're seeing companies like Tesla and others talking about mining and response. The semiconductor mass makes this an even hotter topic, and we see it now in conversations. Our Stage III efforts continue at a furious pace. I know many of you want lots of details, but we will share with you what we can when we think appropriate. I would point out though, that regardless of the path we take our mission is to restore the full domestic supply chain.”

MP Price Trajectories

Using the rifle charts on weekly and daily time frames provides a precision view of the landscape for MP stock. The weekly rifle chart pup breakout resumed after coiling off the $23.01 Fibonacci (fib) level as the 5-period moving average (MA) rises at $36.15. The weekly 15-period MA support sits at the $31.70 fib. The weekly stochastic has been rising on a mini pup towards the weekly upper Bollinger Band (BBs) at $45.21. The daily rifle chart formed a market structure low (MSL) buy trigger on the break through $33.88. The rising 5-period MA sits at $36.79 and 15-period MA at $35.41 support. The daily upper BBs sit at $39.97. The daily stochastic is still rising towards the 80-band. Prudent investors can monitor for opportunistic pullback levels at the $35.94 fib, $34.45 fib, $33.88 daily MSL trigger, $32.77 fib, $31.70 fib, $30.53 fib, $28.20 fib, and the $26.34 fib level. Upside trajectories range from the $42.69 fib up to $67.01 fib level.