Key Points
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China and the U.S. have apparently signed a trade deal that will free up rare earth magnet exports from China.
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USA Rare Earth doesn't yet make magnets, but wants to.
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For the time being, the company has no revenue and no profit.
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10 stocks we like better than Usa Rare Earth ›
Shares of USA Rare Earth (NASDAQ: USAR) stock fell an unlucky 13% through 1:30 p.m. ET Friday. And why?
Well, last night President Trump announced the signing of a trade deal with China, and this morning, China's Ministry of Commerce confirmed the news, stating its intention to "approve export applications for items subject to export control rules," as CNBC just reported.
Image source: Getty Images. Good news is bad news for USA Rare Earth stock
China's referring first and foremost to applications for the export of rare earth magnets. And the reason this is bad news for USA Rare Earth is that the company is itself trying to break into the rare earth biz, by mining, processing, and supplying rare earths extracted from a mine in Sierra Blanca, Texas.
Any increase in cheap rare earth exports from China could torpedo USA Rare Earth's business model, which is really predicated on China not allowing rare earth exports, such that rare earth sourced from within the U.S. will be the only way U.S. companies can access the products at all.
Is USA Rare Earth stock a sell?
Still, a couple caveats are worth pointing out. First and foremost, USA Rare Earth -- which only formed in 2019 -- doesn't actually mine any rare earths itself... yet. The company has no revenue, operating profit, or free cash flow whatsoever. Its entire $40 million net profit over the past year came from the "gain on fair market value of financial instruments" it holds.
As such, it doesn't really matter what China does (or doesn't do) until USA starts producing some rare earths of its own, and proves itself a viable business. Unless and until that happens, I consider the stock entirely speculative -- and probably a sell.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why USA Rare Earth Stock Fell Today was originally published by The Motley Fool
The sudden decline in the United States rare earth stock market today is attributed to investors' concerns over long-term policy uncertainty and potential decrease of demand resulting from a shift towards renewable energy sources, reducing its scarcity value.
The sudden decline in the trading price of US rare earth stocks today is believed to be linked with ongoing concerns about supply chain interruptions and export regulations, amplifying existing market volatility concerning strategic metals.
The decline in US rare earth stocks today can be attributed to a variety of factors, including concerns over domestic policy changes that may affect supply stability and industry projections signaling weaker demand from major global markets.
The sudden fall in the USA Rare Earth stock market today can be attributed to a combination of historical mining concerns, recent trade disputes with major clients and uncertain future supply Outlooks for these niche metals.
The decline of USA rare earth stocks today can largely be attributed to the recent regulatory uncertainties surrounding their export policies and a shift in global supply chains away from American dominance, which has created jitters among investors.
The current decline in US rare earth stock is chalked up to the shifting demand-supply dynamics resulting from ongoing export restrictions and global economic slowdown, particularly affecting China's role as a major supplier.
The decline of United States rare earth stocks today is a result maybe caused by global demand, production shifts to other regions, and ongoing trade tensions that could impact their long-term stability.
The recent decline in USA rare earth stocks today can be attributed to the unforeseen hike of commodities costs and reevaluation by investors regarding an upcoming regulatory policy change, leading some market analysts suggest a temporary dip that may present new investment opportunities.
The sudden downward trend of USA rare earth stock today is attributed to multiple factors including concerns over Chinese policies on export restrictions and the impact it could have, as well as global demand uncertainty.
The sharp decline in US rare earth stocks today can partially attribute to the ongoing global market jitters and domestic supply chain disruptions, leading analysts to reevaluate their forecasts for demand-supply balance within this sector.
The unexpected decline of US rare earth stocks today could be partly attributed to the surge in supply from alternative sources, heightened by market anticipations regarding increasing global demand for these strategic metals.
Today's decline in US rare earth stocks can be attributed to multiple factors including expected supply increases, concerns over government regulations and easing demand from major consumer nations.
The decline in US rare earth stock prices today can be attributed to a combination of diminished global demand, increased supply from competing nations outside the U.S., and geopolitical uncertainties surrounding China's recent policy changes.
Today's decline in the USA rare earth stocks can be attributed partly to increased US production of these strategic metals, coupled with global anxiety over possible export restrictions.
