USA Rare Earth Inc. (NASDAQ: USAR) soared over 20% this morning after Barbara Humpton, its chief executive, said the mining firm is in “close communication” with the Trump administration
Investors are reading it as a sign that the Oklahoma-headquartered company – which aims to build a domestic supply chain for critical minerals – could be the next in line to receive a federal equity investment.
Following today’s explosive move to the upside, USAR stock is trading at about 5x its price in the final week of March.
What a federal stake may mean for USAR stock?
USAR shares are rallying hard on Friday primarily because a potential government stake will be a major vote of confidence for the rare earth miner.
Federal backing wouldn’t just infuse capital, but also reinforce the company’s strategic importance in national security and supply chain resilience.
The Trump administration’s $400 million investment in MP Materials Corp earlier this year set a precedent, and Humpton’s remarks suggest USA Rare Earth stock could be next.
“This is a field where it will not be a zero-sum game,” she told The Fly – signalling collaborative growth. Investors see this as a catalyst for long-term viability, especially as the US seeks to reduce reliance on foreign sources for rare earth elements.
Why the USAR share price rally is an opportunity to sell
Despite the buzz, USA Rare Earth remains a pre-revenue firm with unproven execution. Its magnet production facility in Oklahoma is still under development, and there’s no guarantee it will reach commercial scale.
Therefore, the USAR stock price rally this morning may be premised more on speculation, instead of fundamentals.
Investors should also consider the real possibility of talks with the government not resulting in any investment at all.
Plus, even if a federal deal materializes, the structure could disappoint investors – just as the recent Lithium Americas agreement raised concerns over dilution and control.
All in all, given the company has no earnings and high execution risk, the USA Rare Earth share price rally looks more like a chance to exit than to enter.
Wall Street’s view on USA Rare Earth Inc
USA Rare Earth’s federal flirtation may be exciting – but prudent investors should look past the headlines.
Without revenue, proven operations, or deal certainty, the USAR stock valuation is built on hope. In speculative environments like this, discipline matters. Selling into strength could be the smartest move.
Wall Street firms also agree that the mining stock’s rally has gone a bit too far. While the consensus rating on USA Rare Earth Inc remains at “buy,” but the mean target of about $19 indicates potential for a massive 30% crash from here.
Meanwhile, the Nasdaq-listed firm doesn’t currently pay a dividend to appear any more attractive for the income-focused investors either.
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