- Uranium stocks are likely to stay in the limelight as the U.S. looks to decrease reliance on Russian suppliers.
- Cameco Corporation (CCJ): This uranium producer is keeping some of its mines idle, betting on higher uranium prices in the future.
- Global X Uranium ETF (URA): This thematic fund provides exposure to global companies involved in uranium exploration and mining.
- Uranium Energy (UEC): The acquisition of Uranium One offers access to Irigaray, a large uranium processing facility that has become a central hub for satellite uranium mining projects in Wyoming.
Uranium stocks have been flaming hot since Russia invaded Ukraine in late February. Rising fossil fuel costs have prompted several countries, including the U.S., to look at nuclear energy more closely.
Recent metrics suggest “At the end of 2021, there were 93 operating reactors with a combined generation capacity of about 95,492 MW.” Nuclear plants account for over half of the carbon-free electricity stateside. Therefore, they play a key role in helping the U.S. achieve a carbon-less future.
However, we import most of our uranium from Canada, Kazakhstan, Russia, Australia and others. Thus, the uncertainty around uranium, especially regarding Russian supplies, has pushed prices higher. At present, Uranium futures currently sell for roughly $53 per pound, down from its peak of $64.5 on Apr. 13.
Readers should also note that, uranium, a naturally-occurring element, faces a constrained supply. Because it is highly radioactive, costly inventory management is necessary.
With that information, here are three uranium stocks primed to benefit from a constrained uranium supply in 2022:
|URA||Global X Uranium ETF||$23.65|
|UEC||Uranium Energy Corp.||$4.65|
Uranium Stocks: Cameco Corporation (CCJ)
Our first uranium stock is the Canada-based Cameco (NYSE:CCJ). It is the world’s second-largest uranium producer, accounting for close to a fifth of global production. The company has the capacity to produce roughly 53 million pounds of uranium concentrate per year.
Cameco released fourth quarter (Q4) 2021 results on Feb. 9. Revenue declined 15% year-over-year (YOY) to $465 million. Adjusted net earnings came in at 6 cents per diluted share compared to 12 cents a year ago. Cash and equivalents ended the period at $1.3 billion.
Because of the ongoing war in Ukraine, analysts expect a decline in Russian uranium supply. As a result, the U.S. needs an alternate source and the market sees Cameco as a good option.
CCJ stock has appreciated 42.7% over the past 12 months and 43% from its January lows. Shares are trading at 9.3 times current sales. The 12-month median price forecast for Cameco stands at $36.47.
Global X Uranium ETF (URA)
- Dividend yield: 5.74%
- Expense ratio: 0.69% per year
Our next discussion on uranium centers around an exchange-traded fund (ETF). The Global X Uranium ETF (NYSEARCA:URA) invests in companies involved in global uranium mining and the production of nuclear components. The fund started trading in November 2010.
URA tracks the Solactive Global Uranium Index and has 49 holdings. With regards to subsectors, we see energy with the highest allocation of 53.6%, followed by materials at 22.1%, industrials at 20.8%, financials at 1.9%, and utilities at 1.7%.
The top ten holdings account for about two-thirds of net assets of $1.85 billion. Leading holdings on the roster include Cameco, Sprott Physical Uranium Trust Fund (OTCMKTS:SRUUF), special purpose uranium exploration company Nexgen Energy (NYSE:NXE), natural uranium producer NAC Kazatomprom JSC, and Paladin Energy (OTCMKTS:PALAF), an Australia-based uranium miner.
URA has appreciated about 19% from its Jan. 2022 lows. Given the recent run-up in price, short-term profit-taking is likely. Interested readers could regard the $22 level as a better entry price.
Uranium Stocks: Uranium Energy (UEC)
UEC doesn’t produce or sell any uranium. Instead, the company has been stockpiling uranium purchased in the spot market for relatively low prices to sell later at higher prices.
Management announced Q2 2022 results on Mar. 17. Revenue came in at $13.2 million. The company reported a loss of $5.5 million, representing a loss of 2 cents per share. Its balance sheet boasts $120 million in liquid assets.
In December, the company acquired Uranium One, the world’s fourth-largest uranium producer, to create America’s largest uranium mining company. In addition, the company recently secured an additional 400,000 pounds of uranium, increasing its physical uranium program to 5 million pounds.
UEC stock has soared 80% from its January lows. The 12-month median price forecast for Uranium Energy stands at $6.65. Potential investors could consider investing around $4, or even below.
On the date of publication, Tezcan Gecgil 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.