MP Materials (MP) easily surpassed first-quarter earnings and sales estimates on Thursday afternoon. The sole U.S.-based supplier of rare earth materials benefited from both higher pricing and volume. But MP stock fell in early Friday stock market action.
In a Friday morning note, Deutsche Bank analyst Sathish Kasinathan wrote that MP Materials guided prices and volume lower for Q2 amid semi-annual planned maintenance and a recent correction in prices. Chinese spot prices for key EV materials have cooled off a bit lately amid Covid lockdowns in the country.
Ahead of MP earnings, Kasinathan had reiterated a hold rating for MP stock, while hiking his price target to 45 from 37. The analyst cited “execution risks” related to its Stage II development plan. “We do see potential for re-rating of MP’s stock once the company successfully commissions its Stage II project,” he wrote.
Currently, MP Materials produces rare earth concentrate that it ships to China for processing. However, MP’s Stage II operations now under construction at its Mountain Pass, Calif., site will process its concentrate into separated rare earth oxides that will be sold directly to end customers. Stage III involves turning NdPr into alloy flake and permanent magnets.
“We are making steady progress on our goal to restore the full rare earth supply chain to the United States, including our Stage II project at Mountain Pass and our initial Stage III magnetics facility in Texas,” CEO Jim Litinsky said in an earnings statement.
General Motors (GM) is the foundational customer of the magnetics facility as it tries to lock down the supply of permanent magnets for its Ultium battery EVs, including the Hummer, Silverado and Cadillac Lyriq. Permanent magnets only add about $100-$200 to the cost of an EV, yet they play an important role in optimizing motor performance and improving vehicle range.
On MP’s Q4 earnings call on Feb. 24, CEO Jim Litinsky explained the significance of Stage II and Stage III in financial terms.
Based on market prices at the time, Litinsky said MP Materials had reached an EBITDA run rate of $450 million-$500 million. Once Stage II processing and the Forth Worth, Texas, facility — the first of multiple potential Stage III magnetics plants — were up and running, EBITDA would double to $900 million-$1 billion.
MP Materials Earnings
MP earnings surged 285% to 50 cents a share, beating forecasts by 9 cents. Revenue grew 177% to $166.26 million, crushing estimates of $137.49 million.
MP said realized prices per metric ton of rare earth oxide rose 37% from Q4 and 135% from a year ago. Production volume grew 6% on the quarter and 10% from a year ago.
Following the earnings report, MP stock fell 5.2% to 37.69, after slipping 2.1% on Thursday.
MP stock fell further below its 200-day line, a sign of stalled momentum. The downdraft has been swift since MP stock hit a record 60.19 on March 30, falling 34% since then.
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