USA Rare Earth (USAR) has been pulling back from its highs after a 175% rally from mid-September to mid-October. Investors grew optimistic that the Trump administration would take a significant stake in the company, as it did with MP Materials (MP) and a few other companies earlier in the year.

The CEO of the company confirmed it was in “close communication” with the White House, potentially about a government investment in the company. A few days before that confirmation, the company acquired a British Less Common Metals (LCM) company for $100 million in cash plus 6.74 million shares.

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Should you buy USAR stock now?

The bull case mainly rests on the government taking a stake in the company. This has already been somewhat priced into the stock. The company is building a vertically integrated rare earth supply chain from mining to manufacturing that is independent of China.

USA Rare Earth controls an 80% stake in the Round Top Heavy Rare Earth and Critical Minerals deposit, a 950-acre site near Sierra Blanca, Texas. The site is known to contain 15 of the 17 rare earth elements.

Considering the company is already in talks with the government, I would expect a deal to go through where the government acquires a stake in USAR. That said, the stock is still too richly priced and can retest $20. I’d hold off on buying.

Traders are still divided on the stock, with most believing it will remain below $30 by December.

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