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Why MP Materials Stock Rallied 44% in February

What happened

Shares of rare earth miner MP Materials (NYSE: MP) rose a dramatic 44% in February according to data from S&P Global Market Intelligence. That's a huge price gain in a very short period of time, for sure. But the company, which came public via a blank check company in late 2020, was up nearly 180% between its IPO and the end of February, so this month's gain is just a continuation of a trend.

So what

There are two things to note here. First, MP Materials' focus on rare earth metals is tied into the growth of electric automobiles. That's because the metals are a vital component of high-tech magnets needed to make such vehicles, and other devices, work. And this sector is very much in the news today, increasing investor attention on any company that plays into the electrification trend.

Image source: Getty Images.

There's more to this story, however, because MP Materials is one of the very few non-Chinese options in the rare earth space. China has been floating the idea that it might limit rare earth exports, which would be a big problem for a lot of companies now reliant on the country for these materials. That news hit in February and likely increased the excitement around MP Material's stock.

Now what

A lot of good news has been priced into MP Materials stock in a very short period of time, given that it has only been public for around four months or so. It has a great story, helped along by China's trial balloon on export restrictions, but conservative investors should probably tread with some caution here. More aggressive long-term investors, meanwhile, will want to make sure they fully appreciate the company's plan to both mine for and, eventually, process rare earth metals. At this point, anyway, it can't fully replace what is coming out of China.

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