MP Materials Has Collapsed 60% From Its Highs. Here's Why I'm Not Buying (Yet).

MP Materials has fallen about 60%, from roughly $100 a share last October to about $40, despite analysts' average price target of approximately $71. The author is hesitant to buy because the Pentagon's NdPr price-floor payments contributed $17.6 million last quarter and accounted for more than 60% of adjusted EBITDA; the 10-year price floor expires at the end of 2035. The key question is whether MP can generate substantial profits without that government support.

Analysis

The key valuation issue is earnings quality, not simply whether government support “counts.” A credible, enforceable floor can be valued as a long-dated contractual cash-flow stream; treating it as worth zero would understate downside protection. But its value should be discounted for contract eligibility, payment mechanics, policy durability and the fact that it does not itself prove Mountain Pass can compete at unsubsidized prices. The near-term risk is multiple compression if investors capitalize reported EBITDA as though it were repeatable operating profit. The longer-term upside is that the protected period gives MP time to improve costs and move further into processing or magnets, potentially reducing dependence on the floor. That transition is not established by customer announcements alone: verify realized pricing, output, capital spending and EBITDA excluding support. Over the next 1–3 months, prioritize the next filing’s reconciliation of floor payments to cash received and ex-support results; over 6–18 months, watch for sustained improvement in those underlying economics. Contrarian view: the 2035 expiry is not an immediate cliff, so a blanket “subsidized earnings are worthless” thesis is too bearish. Conversely, analyst targets do not resolve contract or execution risk. The stock’s decline alone is not an entry signal.

Key Decisions for Investors

• No fresh outright long at present. Revisit after MP provides a clear, recurring reconciliation of EBITDA and cash flow excluding price-floor support, alongside evidence that the underlying business is improving.
• For existing exposure, size MP against the possibility that reported profitability is not yet self-sustaining; avoid treating the full supported earnings stream as an ordinary mining-company run rate.
• Set an alert for two consecutive reporting periods showing materially improved ex-support EBITDA and cash conversion. That would support a staged long; deterioration in production, costs or ex-support results would invalidate the improvement thesis.
• Do not initiate an outright short solely on subsidy dependence: the floor may cushion NdPr downside. Reassess if disclosed contract terms, eligibility or payment reliability weaken, or if operating progress fails to reduce reliance on support over the next 6–18 months.