BMO Capital Markets has upgraded MP Materials (MP.US) from "Market Perform" to "Outperform" with a $75 price target, citing its landmark agreement with the U.S. Department of Defense (DoD). The deal includes price floors, financing, guaranteed EBITDA, and offtake volumes, which BMO says "solidifies MP Materials' leadership in the U.S. rare earth sector."

Analyst Raj Ray noted that while rare earth prices have softened after China temporarily lifted export restrictions, the fragility of the U.S. rare earth supply chain remains evident. He believes MP Materials' current valuation offers investors an attractive entry point to gain exposure to the rare earth theme.

Ray highlighted MP Materials' joint venture with the DoD and Saudi Arabia’s Maaden Mining, which plans to establish a high-standard rare earth refinery in Saudi Arabia. This facility will enable increased production of neodymium-praseodymium (NdPr) oxide, with the DoD funding MP's development capital expenditures.

BMO emphasized that MP Materials' focus is on executing its ambitious yet achievable growth plan. Success in scaling standalone project capacity could further expand its P/E multiple. Additionally, the company's recycling partnership with Apple (AAPL.US) and a new 10x larger offtake agreement with the DoD—at more favorable pricing—add upside potential.