MP Materials stock was on track for a third consecutive record close on Tuesday, as the bullish sentiment on rare earth players kept getting stronger.
MP Materials shares rose 8% to $102.71 in premarket on Tuesday. It comes after a 21% gain on Monday and an 8.4% jump on Friday.
Smaller rare-earth companies USA Rare Earth and Ramaco Resources rose 9.7% and 4.5%, after notching double-digit gains Monday. S&P 500 and Dow Jones Industrial Average futures were down 0.9% and 0.5%, respectively.
The recent sector rally was prompted by escalating trade tensions between the U.S. and China late last week. President Donald Trump said Friday that the U.S. would hit back against Beijing's new export restrictions on rare earth minerals with tariffs.
MP is the largest rare-earth producer in the Western Hemisphere. The company makes neodymium and praseodymium oxides -- key components of magnets that often end up in high-tech products such as electric vehicles and F-35 fighter jets.
With investors piling into MP Materials and others in the sector, the high profile of rare earths likely reduces the risk of a share price drop for MP, Jefferies analysts led by Laurence Alexander noted Monday. They continue to expect the company to secure new sales agreements in the next few quarters, totaling $300 to $400 million in profit from their magnet business.
Alexander rated MP Materials stock Buy with a price target of $90, ahead of Monday's gains. Overall, 60% of analysts covering the stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
The average analyst price target for MP stock is about $78, well below where shares are trading. Entering Tuesday trading the stock was up more than 500% so far this year and Wall Street has had trouble keeping up. The average analyst price target started the year at about $22 a share.
Price targets started to move much higher in July after the Defense Department and MP struck a blockbuster deal that included an equity stake in MP, a price floor for rare earth products, and a guaranteed customer for new capacity.
MP "plans to manufacture 10,000 metric tons of magnets," wrote Canaccord analyst George Gianarikas in a Monday report.
Century-old Vacuumschmelze of Germany produces about 1,000 tons in Europe and plans to expand, including a South Carolina facility with 2,000 tons of capacity, he added.
Other players with capacity plans include Noveon Magnetics of San Marcos, Texas, and USA Rare Earth, with its plans to build 4,800 tons of rare earth magnets annually in Oklahoma.
"And we need it," said Gianarikas. North American magnet demand today is roughly 50,000 metric tons per year and growing. "There is still a large [capacity] void to fill."
That's what has investors excited.