Why MP Materials Stock Got Mashed on Monday

Key Points

• In a somewhat counterintuitive set of moves, an analyst downgraded his recommendation on the shares but lifted the price target.

• Regardless, he feels the stock isn't as compelling a buy as it once was.

• 10 stocks we like better than MP Materials ›

MP Materials (NYSE: MP), which is the company that owns the one and only rare earth mine in the U.S., has attracted considerable investor interest lately, but didn't have a great Monday on the stock market.

The company's shares closed the session more than 2% lower in price after a researcher downgraded its recommendation on them. The S&P 500 index did relatively better, sliding by a relatively light 0.3%.

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Knocked down a peg

The downgrading party was CFRA's Matthew Miller, who that morning changed his rating on MP Materials to buy from its previous strong buy. In doing so, however, he raised the price target on the shares considerably, to $88 apiece from $68.

Image source: Getty Images.

Investors clearly focused on the recommendation downshift rather than the price target boost. This might be due to the fact that Miller is still counting on the company to book a net loss this year, according to reports.

While he feels that the rare earth specialist will mine a far higher earnings before interest, taxes, depreciation, and amortization (EBITDA) figure than previously anticipated -- Miller raised his estimate for this to $850 million from $650 million for this year -- it should still land in the red on the bottom line.

He's now modeling a $0.10 per share deficit, which, although much narrower than his previous $0.36 net loss estimate, is still a considerable below-the-waterline figure.

Rocky times

As we're in the thick of a rather stop-and-go trade war with foreign partners (particularly with China, a big national consumer of rare earths), MP Materials' business is volatile at the moment. It can be hard to get a fix on the company's prospects, although its position as the sole rare earth pure-play in this country is inherently valuable. The stock, then, is always worthy of consideration as a buy.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.