We recently published a list of the 11 Most Promising EV Battery Stocks According to Analysts. In this article, we are going to take a look at where MP Materials Corp. (NYSE:MP) stands against the other promising EV battery stocks.
Despite the electric vehicle industry growing at a fast pace, some challenges remain. The major ones are range anxiety among consumers, slow battery charging time, and the availability of charging infrastructure. However, even with these challenges, the industry remains healthy and a lot of energy and resources are being contributed toward it.
The infrastructure market is expected to grow at a phenomenal pace as PwC expects the EV supply equipment (EVSE) market to grow from $7 billion to $100 billion by 2040, at a 15% compound annual growth rate.
For electric vehicle components, governments around the world are incentivizing EV production. For example, the U.S. Department of Energy (DOE) recently announced $1.7 billion in funding to transition 11 vulnerable auto manufacturing plants across eight states to EV production and related components. For more details, you can read 8 Best EV Stocks to Buy According to Short Sellers.
Advancements in EV Battery Technology
Due to the environmental impacts of internal combustion engines, scientists have also been working tirelessly to solve the current problems faced by EV batteries. Researchers, led by the University of Colorado Boulder, have uncovered the cause of battery degradation, a common issue that leads to reduced capacity over time. Their study, published in Science.org, may pave the way for improved lithium-ion batteries, which are crucial for EVs and energy storage.
Using advanced X-ray technology, they discovered that hydrogen molecules from the battery’s electrolyte bind to the cathode, taking spots meant for lithium ions, which weaken the battery’s performance. This new understanding could help engineers develop longer-lasting, cobalt-free batteries for EVs, which would increase driving range, reduce costs, and address environmental and ethical concerns related to cobalt mining.
Additionally, according to a research report published in Frontiers in Quantum Science and Technology, Yuji Hatano and his team explored the impact of transverse magnetic fields on diamond quantum sensors for EV battery monitoring. Their research aimed to improve measurement accuracy for temperature and magnetic fields, which are crucial for determining the state of charge (SOC).
The study showed that diamond sensors enhance SOC estimation, which could potentially increase the EV cruising range by 10%. A prototype demonstrated high precision with currents up to 1,000 amperes, and misalignment detection was highly accurate. The findings suggest diamond quantum sensors could significantly improve battery monitoring in EVs and other industries.
Moreover, solid-state batteries could also reduce the charging time in batteries which could drastically improve the consumer sentiment and increase the demand for EVs. It was suggested by Mark Fields, former Ford CEO and President on CNBC’s ‘Squawk Box’ and we discussed it in our article on the best EV stocks for the long term. Here is an excerpt from the article:
“Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station…
…He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.”
Our Methodology
For this article, we identified over 20 EV battery stocks through screeners and ETFs. We narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 12. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 hedge funds as of the second quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Heavy machinery at work in a mining facility, excavating the earth for rare earth minerals.
MP Materials Corp. (NYSE:MP)
Average Analyst Price Target Upside as of September 12: 45.14%
Number of Hedge Fund Holders: 28
One of the most promising EV battery stocks, MP Materials Corp. (NYSE:MP) has established itself as a key player in the rare earth materials sector with its operations centered on the Mountain Pass mine in California. The company plays an essential role in supplying materials crucial for the EV industry and EV batteries, specifically neodymium and praseodymium oxides.
The elements are vital for creating permanent magnets used in EV traction motors, which are essential for enhancing the efficiency and performance of electric vehicles. In the third quarter of 2023, the company began producing these critical oxides at its Mountain Pass facility. The development is a major step in re-establishing a reliable domestic supply chain for rare earth materials in North America.
The company’s efforts to expand its operations are further supported by an important agreement with General Motors. Announced in December 2021, the long-term supply contract states that GM will receive rare earth materials and magnets sourced and manufactured in the U.S., which is in line with GM’s goal of securing a stable supply chain for its EVs.
MP Materials (NYSE:MP) is also expanding its operations with a new facility in Fort Worth, Texas. The company has commenced production of commercial precursor materials there and plans to manufacture finished magnets by late 2025. The expansion is aimed at enhancing its capacity to meet the rising demand for EV components.
Furthermore, in April, the company received a $58.5 million award from the U.S. Internal Revenue Service and Treasury to support the construction of this facility, which will be the first in the country to produce fully integrated rare earth magnets. General Motors will be a primary customer for the finished products, which will contribute to GM’s North American EV production.
In addition to its production expansion, MP Materials (NYSE:MP) has been refining its rare earths with promising results. In the second quarter, the company produced 272 metric tons of neodymium and praseodymium, with 136 metric tons sold. The company expects production of these rare earths to increase by 50% in the third quarter, driven by a new automotive customer’s demand for these materials in their magnets.
Moreover, the company has demonstrated confidence in its future by approving a significant increase to its share repurchase program. In September, it authorized an additional $300 million for share repurchases, bringing the total to $600 million. The program, which is extended until August 2026, shows the company’s commitment to returning value to shareholders, having already repurchased around 8.6% of its shares for $225.1 million in 2024.
MP Materials (NYSE:MP) has received a consensus Buy rating as per the coverage of 12 analysts. The average price target of $20 implies an upside of 45.14% to the stock’s current price, as of September 12.
At a stake value of $163.044 million, 28 hedge funds held positions in MP Materials (NYSE:MP) in the second quarter. As of Q2, QVT Financial is the top shareholder in the company and has a position worth $44.48 million.
Bernzott Capital Advisors stated the following regarding MP Materials Corp. (NYSE:MP) in its first quarter 2024 investor letter:
“Materials were the leading detractors to performance. Our exposure to MP Materials Corp. (NYSE:MP) was the main culprit, as the stock declined by 28% as prices for their critical commodity output NdPr exhibited weakness due to seasonality factors and lower demand from Electric Vehicles and other industrial applications. Despite the sell-off, we increased our position in the stock as we believe the long-term fundamentals remain intact.”
Overall MP ranks 7th on our list of the most promising EV battery stocks. While we acknowledge the potential of MP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MP, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.