Uranium stocks are trending higher today as prices for the metal continue to run higher. Also fueling the moves are reports that retail investors are looking at uranium-related securities as the next meme play.
Shares of Uranium Energy (NYSEMKT:UEC), Cameco (NYSE:CCJ) and Dennison Mines (NYSEMKT:DNN) are each trending this morning as the spot price of uranium rises to $51 a pound, up 21% year to date as Russia’s invasion of Ukraine raises concerns about supply constraints.
There are also media reports that retail investors are targeting uranium stocks in an effort to push their prices up sharply as happened to companies such as GameStop (NYSE:GME) over the past year.
What Happened With Uranium Stocks
Uranium prices have been rising along with other commodities like wheat, oil, nickel and gold. Prices for nickel and wheat have reached record highs in recent days, while prices for other commodities are at multi-year highs.
It seems that retail traders are targeting the radioactive metal as it is a key ingredient used to power nuclear reactors, and the rally in uranium stocks comes amid the threat of an energy crisis. Right now, oil prices are trading above $110 per barrel.
On social media outlets and message boards, investors are betting that nuclear power will be used alongside renewable energy sources to decarbonize the planet. In turn, they believe that nuclear energy will become a more important part of global energy strategies as oil becomes more expensive.
Russia is the world’s third-largest oil producer and Ukraine is home to Europe’s largest nuclear reactor, used to power much of the continent.
Why It Matters
The rally in uranium stocks is good news for individual related equities. Shares of CCJ have risen 25% year to date, and are now up 74% over the past 12 months. DNN stock has risen 70% in the past year. The bet that nuclear power can become more of a priority as oil prices reach new heights is positive for the uranium industry.
However, a meme rally that pushes uranium stocks to exorbitant levels could ultimately falter as it has in other stocks. Shares of GameStop are now 70% below their 52-week high of $344.66 a share.
What’s Next for UEC, CCJ, DNN
The rally in uranium stocks looks likely to continue in the near term. How sustained the rally ultimately is will depend on whether a resolution to the crisis in Ukraine can be reached, and whether oil prices continue to run higher.
Some analysts are calling for $200 a barrel oil later this year. Uranium stocks are likely to remain volatile, more so if they do end up becoming meme plays. Investors should proceed with caution.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
