MP Materials (NYSE: MP) shares fell 2.4% in Wednesday’s trading as J.P. Morgan downgrades shares to Neutral from Buy with a $16 price target, cut from $20, citing weaker “assumed long-term NdPr pricing given China’s supply resilience and a low likelihood of a market bifurcation within this decade.”
NdPr pricing at levels not seen since November 2020 has prompted MP Materials (MP) to slow Stage 2’s ramp with initial elevated production costs and instead focus on Stage 1 concentrate production, JPM’s Bill Peterson says, adding that “while Stage 3 could start contributing EBITDA on the margin later this year from initial alloy production, we still consider large-scale magnet production as a call option at this point.”
Peterson sees shipment, EBITDA and free cash flow risk all weighted to the downside in the near term given the inevitable ebbs and flows of Stage 2’s ramp, although MP (MP) should “drive improving financial performance over the mid-term amid recovering market fundamentals supporting further Stage 2 ramp, along with additional concentrate from its capital-light Upstream 60K initiative in the coming years.”
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