Renewable energy stocks figured prominently on investors’ minds in 2020, and MP Materials (NYSE:MP), a producer of rare earth minerals used in EVs, wind turbines, and other advanced technologies, was no exception. After MP Materials completed its merger with Fortress Value Acquisition in November, shares of its stock skyrocketed, soaring more than 113% through the rest of 2020.
Although the pace of their steep climb slowed, shares of MP Materials continued to bound higher through the first half of the year and rose 15%, according to data from S&P Global Market Intelligence. Besides an encouraging earnings report, Wall Street’s enthusiasm for the stock and the momentum building behind the embracing of EVs all spurred the stock higher in the first six months of the year.
The largest producer of rare earth metals in the Western Hemisphere, MP Materials and its success is heavily linked to the growth of the EV market. So when President Joe Biden entered the White House in January and announced his interest in transitioning the federal government’s fleet of vehicles to EVs, investors recognized this as an auspicious sign for MP Materials. And when China, in February, expressed an interest in possibly limiting its exporting of rare earth metals — which would represent a significant challenge for EV production — investors raced to pick up shares of MP Materials.
The company’s strong fourth-quarter 2020 earnings report (provided on March 19) represented another factor contributing to the stock’s rise. Investors celebrated the company’s success in doubling its revenue year over year as well as its achievement in growing its bottom line well beyond expectations. Whereas analysts expected the company to report EPS of $0.05, MP Materials booked EPS of $0.20.
Digging into this mining company’s prospects, the bulls on Wall Street voiced their approval, motivating investors further to pick up shares. In March, Morgan Stanley initiated coverage on the stock with an overweight rating and a $57 price target, according to Thefly.com. Shortly thereafter, Cowen began covering the stock, assigning an overweight rating and a $50 price target. More recently, in June, J.P. Morgan and Baird initiated coverage on the stock, providing bullish ratings of overweight and outperform, respectively.
With the start of the second half of the year, shares of MP Materials reversed course from their rise through the first six months, falling about 4%. This slight pullback offers investors interested in an alternative approach to gaining exposure to the EV industry the chance to open a position at a discount to the higher price tag the stock was sporting in the spring.
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