Why MP Materials Bears Were Right Before The Drop

If you had seen the excited coverage around MP Materials’ Pentagon deal, Apple partnership, and price target hikes and decided to wait on the sidelines, the past year might look like trouble you sidestepped. Holding MP Materials over the past year would have meant a 37.1% loss, including dividends. With that outcome in hand, what single assumption in those 2025 forecasts would you want to stress test first: the growth, or the valuation multiple?

A Narrative on Simply Wall St is one investor's written case for a company, with its growth, margin and multiple assumptions spelled out. Those assumptions imply an estimated Fair Value.

MP Materials is not the only name tied to this theme. Zero in on 34 best rare earth metal stocks and compare how each one is priced.

The Argument You Would Have Been Weighing Up On MP Materials

The shares cost US$65.57 at the start of the period, and MP Materials sat between two very different stories about what that price implied.

On the bullish side, one narrative put Fair Value at US$77, built on revenue climbing 61.3% a year and profit margins shifting from a loss to 23.2%, with the shares later trading on a P/E of 87.3x in that scenario.

The bearish view pinned Fair Value at US$30, still assuming 60.1% annual revenue growth and margins moving to 27.8%, but only on a future P/E of 29.0x and with rare earth recycling seen as a structural threat.

What The Evidence Did To The MP Materials Argument

MP Materials reported Q2 2026 revenue of US$126.07m and a smaller net loss of US$20.296m, with net margin improving from a loss of 53.8% to a loss of 16.1%. That shift in profitability supported the optimistic case on execution, although continued losses kept the promised 23.2% or 27.8% margin unproven. Overall, the evidence cut both ways.

The useful takeaway is where to look. When a thesis leans on rapid margin expansion and premium P/E, it helps to focus on the path of net margin and absolute earnings in filings. From there, investors can ask whether the valuation still assumes a faster turn than the income statement is yet showing.

What MP Materials’ Price Drop Now Asks You To Believe

MP Materials trades at US$40.87 today, after a 37.1% loss over the past year. The selected Narrative now places its Fair Value above that share price, based on a case that leans heavily on contract-backed revenue and downstream expansion rather than just rare earth prices.

To see the fall as opportunity rather than warning, a buyer at today's level would need to believe contracted demand and new magnet and recycling capacity can eventually support meaningfully higher and more durable margins than the market currently credits.

"MP Materials'' recently secured long-term, government-backed offtake agreements, including a minimum price floor and guaranteed EBITDA for magnet output from the Department of Defense, as well as a $500M+ multi-year supply contract with Apple, ensure predictable and resilient revenue streams insulated from price volatility, directly enhancing future revenue and earnings visibility."

One Narrative has put a figure on that disagreement. → See the Narrative with its higher Fair Value, assumptions and all

Go Straight To The Source

Passing on this one could have spared you a loss. Where might you find the opposite surprise? Start looking for companies whose prices leave room for a better outcome than investors expect. These three trade below our estimated value.

• Company 1 - 46% below our estimate - turns a record backlog of AI-focused data center projects into higher utilization.
• Company 2 - 18% below our estimate - adds high value photonics programs as AI data center optics reshape capacity needs.
• Company 3 - 34% below our estimate - expands high horsepower engine capacity to serve long term data center power contracts.

Three companies from the same screener. Open every one of the 29 undervalued companies on it →

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