USA Rare Earth (USAR)
Article reprinted from TipRanks.com —
Next on our list is USA Rare Earth. As its name suggests, this company aims to become a competitor of MP Materials, and to expand the playing field of rare earths producers in the US. USA Rare Earth describes its mission as establishing a rare earth magnet supply chain in the US domestic market; practically, this means that the company is in the process of developing a new rare earth magnet facility in the States.
Specifically, the company is commissioning a new production lab in Stillwater, Oklahoma, with the goal of working with customers this year. The facility is planned for initial production of 5,000 metric tons at full capacity. USA Rare Earth plans for this facility to serve the domestic US industrial demand for rare earths, particularly in such fields as defense, robotics, EVs, and semiconductors – as well as more mundane fields such as cordless tools.
The company’s Oklahoma facility is backed up by the company’s West Texas Round Top Deposit, which contains 15 out of 17 rare earth elements. USA Rare Earth is setting up a supply chain, so that the mining operation in Texas can supply the Oklahoma manufacturing plant. Finally, USA Rare Earth also has an R&D facility, located in Wheat Ridge, Colorado, tasked with developing new methods of extracting rare earth elements from the ores.
USAR went public in March of this year, through a SPAC transaction with Inflection Point Acquisition Corporation II. The business combination officially closed on March 13, and the new USAR ticker started trading on March 14. The total investment in USAR, through the business combination and the pre-funded PIPE investors, came to nearly $50 million.
In May, USAR released its first public set of business results. Since the SPAC closed, the company has achieved several important milestones – it has opened the Oklahoma facility; it has brought on board key positions, in engineering, production, finance, and operations; it has signed its first MOU with a customer; and it has produced from the Round Top Deposit a quantity of dysprosium oxide with 99% purity.
These are important achievements, and have led Roth’s Suji Desilva, an analyst who ranks amongst the top 2% of Wall Street stock pros, to take an upbeat look at this company and its newly public stock. The 5-star analyst writes, “We expect USAR to grow with shifting US government and commercial demand away from China REE suppliers, who dominate the market today. While REE market demand comes from a broad set of end markets, we believe near-term domestic REE demand will be catalyzed by the unacceptable risk associated with China supplier exposure for US military/defense and automotive customers, including highly sensitive programs such as F-35 fighter jets and naval destroyers/submarines. We are encouraged by USAR’s strong execution into the industrial-grade REE magnet market, which can fuel near-term revenue ramp as the company scales up its supply chain capability.”
To this end, Desilva rates USAR as a Buy, and sets a $15 price target for the coming 12 months. If met, the figure could yield returns of 65% over the one-year timeframe. (To watch Desilva’s track record, click here)
USAR has slipped under most analysts’ radar; its Moderate Buy consensus is based on just two recent ratings – but both are Buys. Meanwhile, the $15 average price target matches Desilva’s objective. (See USAR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
