Canaccord Genuity raises MP Materials stock price target on Apple demand

Investing.com - Canaccord Genuity raised its price target on MP Materials (NYSE:MP) to $64.00 from $55.00 on Wednesday, while maintaining a Buy rating on the rare earth materials producer. The stock has shown remarkable momentum, delivering a 273% return year-to-date and currently trading near its 52-week high of $62.87. According to InvestingPro data, the company’s strong price performance comes despite challenging profitability metrics.

The research firm’s analysis suggests Apple (NASDAQ:AAPL) likely requires approximately 457.4 tons of NdFeB magnets annually, potentially representing over $90 million in revenue for MP Materials. This demand could account for more than 20% of MP’s incremental 2,000-ton NdFeB magnet capacity at its Independence facility.

Between General Motors (NYSE:GM) and Apple, Canaccord estimates that approximately 49% of the anticipated 3,000 tons per year of magnet capacity at Independence is already contracted. The firm noted that while current customers include the Department of Defense and Apple, future clients could include Tesla (NASDAQ:TSLA), Ford, or GE.

Canaccord’s analysis indicates current U.S. demand is approximately 50 tons per year of NdFeB magnets, suggesting a need for increased domestic production capacity to reduce dependence on Chinese imports. The firm stated that MP’s anticipated total capacity of 10,000 tons per year would not be sufficient for complete U.S. independence.

The price target increase reflects Canaccord’s refined financial model for MP Materials, which now extends to 2040, and accounts for the company’s potential growth in the rare earth magnet supply chain.

In other recent news, MP Materials announced a significant public-private partnership with the U.S. Department of Defense (DoD). This multibillion-dollar agreement includes a $400 million equity investment and a $150 million loan to expand MP Materials’ rare earth capabilities and build a new magnet manufacturing facility. The DoD will establish a price floor of $110 per kilogram for NdPr products, and the partnership could make the DoD the company’s largest shareholder with a 15% stake. Analysts from TD Cowen and Canaccord Genuity have responded positively, with both firms significantly raising their price targets for MP Materials to $55, maintaining Buy ratings. DA Davidson also reiterated its Buy rating, highlighting the partnership’s potential to enhance MP Materials’ processing capabilities and provide significant EBITDA visibility.

However, Jefferies downgraded MP Materials from Buy to Hold, citing changes in China’s export policies for rare earth magnets. Despite this, Jefferies raised its price target slightly to $33, reflecting a cautious outlook. The agreement with the DoD supports MP Materials’ plans to expand its Mountain Pass operations and construct a second domestic magnet manufacturing facility. This partnership represents a transformative development for MP Materials, strengthening its position in the U.S. rare earth materials sector.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.