US rare earths soared today. Is the stock a buy?
USA Rare Earth shareholders received news that could potentially lead to a prolonged rally.
American Rare Earths (To use 14.99%) Huge gains were recorded during Thursday’s trading session. Shares of the deep-sea mining specialist rose 15%. Dow Jones Industrial Average In today’s trading, the index fell 0.6%. one side, S&P 500 decreased by 0.3%, Nasdaq Composite decreased by 0.1%.
The key factors driving the broader market lower today were the same factors that led to big gains in U.S. rare earth stocks. China plans to reduce rare earth mineral exports to the United States, but this could be a huge opportunity for American rare earths.
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Can I Buy USA Rare Earth Stock Now?
China is the world’s leading supplier of rare earth minerals. According to some estimates, China accounts for about 70% of global rare earth mineral procurement. If relations between the United States and China continue to deteriorate, the United States will likely need to increase domestic sourcing of rare earth minerals and increase trade with related countries.
Because USA Rare Earth’s business is not yet profitable, the company is almost by definition a risky investment. These characteristics make them riskier than well-established mining stocks. Conversely, the company expects to begin production next year at its Magnet facility in Stillwater, Oklahoma, and has other projects that could move into production mode within the next two years.
USA Rare Earth continues to be a high-risk investment, and the stock is too dependent on growth to suit risk-averse investors. On the other hand, the company’s potential to play a leading role in supplying rare earth minerals to the United States makes it a potentially explosive play.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
