Why Cameco, Uranium Energy and Uranium Royalty Shares Are Green

What happened

Uranium prices are in a funk – down 12% over the past week and down 15% from their recent highs in mid-September – but don’t try to tell investors in uranium.

At 12:50 p.m. EDT Wednesday, shares in the uranium mining company Cameco (NYSE: CCJ) jumped 8.5%, followed closely by Uranium energy (NYSEMKT: UEC), up 7.6%; and Uranium Royalty Company (NASDAQ: UROY), up 4.9%.

Image source: Getty Images.

So what

What are uranium investors worried about today? In a nutshell: Cameco – and the upgrade the uranium stockpile just received from Bank of America.

As TheFly.com reported today, BofA raised its rating on Cameco stock from neutral to long and raised its target price on the stocks to C $ 40 (approximately $ 32.23). This is about 18% above the level where Cameco shares are currently trading.

As the analyst explained, Cameco hasn’t been particularly profitable lately. (In fact, data from S&P Global Market Intelligence shows it has lost money in four of the past five quarters and three of the past five years!) Way to curb global warming and decarbonize the economy – maybe faster than expected.

Now what

Indeed, according to the analyst, spot uranium prices could reach $ 60 a pound by the first quarter of next year – and that would be good news not only for Cameco, but also for Uranium Energy. and Uranium Royalty. In case you were wondering, neither of these do very well in terms of profit either. Everyone has lost money in each of the past five years, so they could really benefit from an increase in the selling price of their main product.

There is, however, a caveat that uranium investors should keep in mind even if they become optimistic about this upgrade. According to experts at MiningReview.com, the Bank of America’s price target of $ 60 for uranium also happens to be the price at which it will become profitable enough to mine uranium, to “entice” producers of uranium. uranium to produce more uranium. So if uranium Is reaches $ 60 early next year, you can anticipate an influx of new offers that will drive prices down again.

Such is the adventure of investing in cyclical stocks.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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