Speaking with CNBC on Thursday, USA Rare Earth’s (USAR) CEO Barbara Humpton confirmed the company is in “close communication” with President Doanld Trump’s administration.
The mining stock rallied nearly 15% on Friday as investors believed her comment suggests the U.S. government is interested in taking an equity stake in the Oklahoma-headquartered firm.
Including the rally on Friday, USAR stock is trading nearly 400% above its year-to-date lows.
USAR shares pushed aggressively to the upside on Oct. 3 mostly because a federal stake would significantly de-risk the company’s development and provide crucial capital for what is currently a pre-revenue venture.
Such an investment would position the Nasdaq-listed firm as a cornerstone of the broader U.S. effort to build a secure rare-earth-to-magnet supply chain, cutting reliance on China.
Financially, what government support could mean for USA Rare Earth isn’t just stable demand, but protection against volatile rare earth prices as well.
Additionally, it could accelerate project timelines for the company’s Texas mine and its Oklahoma magnet facility and help attract broader investor capital into USAR stock.
While Humpton’s comment sure signals better things ahead for USAR shares, they remain a high-risk investment because the company is pre-revenue.
Its valuation has soared purely on speculation of a deal with the Trump administration and national security concerns, which makes USA Rare Earth shares extremely volatile and potentially over-bought.
Until a federal investment is officially announced and the firm demonstrates commercial viability, therefore, USA Rare Earth stock is suitable only for investors with a substantial risk tolerance.
Wall Street also currently sees the USAR stock price rally as significantly overdone.
While the consensus rating on USA Rare Earth shares remains at “Strong Buy,” the mean target of about $19 indicates potential downside of more than 30% from here.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
