Image Source: Unsplash
 

USA Rare Earth (USAR) stock has nearly doubled in the past month after gaining significantly today. The company’s CEO confirmed that the company is in close discussions with the Trump administration about potential government support.

What this means is that USA Rare Earth could come to an arrangement with the government similar to the one MP Materials (MP) inked.

As the company’s CEO, Barbara Humpton, herself said, building out domestic rare earth capacity won’t be a zero-sum game and will require collaboration from multiple rare earth companies. Obviously, these companies will need capital and government support if they are to grow their capacity to the point where Chinese imports can be offset.

Plus, USA Rare Earth recently announced the acquisition of Britain's Less Common Metals (LCM) for $100 million in cash and 6.74 million shares. The company claims LCM is the leading rare earth metal and alloy producer outside of China.

The market is generously rewarding USAR stock today. But should you buy into it?
 

USAR may follow in the footsteps of MP stock
 

President Donald Trump pursued an unprecedented multibillion-dollar public-private partnership with MP Materials earlier this summer. The stock delivered explosive gains in anticipation of that deal and continued soaring afterwards, especially as other companies approached the company to secure their own supply. Being backed by the U.S. government comes with perks that Wall Street will pay a premium for.

Similarly, USAR has delivered explosive gains, and if the government takes a large equity stake like with MP, more upside is ahead. There is a significant open interest spike at $30 for options expiring today.
 

In the long run, many traders are expecting USAR to go to $35 by year-end. I expect a successful deal with the government, which can take USAR stock to $40 and beyond.

More By This Author: