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Concerns over whether Kazakhstan will be able to maintain production levels needed to maintain uranium supplies to the world triggered a bull run in uranium stocks on Friday.shares of Cameco (NYSE:CCJ)The company, the world’s second-largest uranium producer and by far the most valuable uranium stock in the Western world with a market capitalization of $22 billion, rose modestly by nearly 10% in afternoon trading. denison mine (NYSEMKT:DNN) and uranium energy (NYSEMKT:UEC) Both soared by more than 10%.
As noted earlier today, uranium and uranium stocks have soared following warnings that Kazakhstani uranium miner Kazatomprom may not be able to meet its target production levels this year or next. (Kazatomprom is the world’s largest uranium producer with a 20% market share.) Additionally, a U.S. government initiative announced earlier this week will provide $500 million in subsidies to produce highly analytical low-enriched uranium (HALEU) in the United States. ) to encourage the production of , contributing to the rise in prices.
Here’s how to play in this bull market.
Appraisal value skyrockets
Because uranium stocks have become very expensive these days, thanks to rising uranium prices.
The “cheapest” of the stocks, Denison stock, trades at more than 34 times trailing 12-month earnings, according to the latest report. The next cheapest stock is Cameco stock, which is relatively cheap at a P/E ratio of 102 times. Meanwhile, Uranium Energy is a stock that was just named a “short-term preferred stock” today. [uranium] “Producing in North America,” according to uranium investment advisor Ocean Wall, would cost a staggering 693 times the profits and 172 times the profits expected to be earned in 2024.
On the one hand, such an assessment may be justified. After all, the spot price of uranium has roughly tripled over the past three years, with a rough average annual increase of 100%. If uranium prices continue to rise at the rate they have been, the valuation may not actually be extreme, even at 100x earnings.
Recent past performance may not predict future results
But what if the price is high? please do not Will it continue to double every year? As an investor, that’s why I don’t want to be pessimistic about the current uptrend in uranium stocks.
Consider: With a recent spot price of $92.50 per physical pound of uranium (and reports of at least one spot trade recently trading at $100 per pound), uranium prices are at It’s up more than five times from its lows. Indeed, on the plus side (for uranium bulls), prices have yet to return to the all-time highs of 2007, when uranium traded as high as $140 per pound. Therefore, there is still plenty of room for uranium prices and uranium stock earnings to continue rising.
The problem is that even that all-time high price only lasted about two months before uranium prices plummeted again, according to data from Trading Economics. For the past decade and a half, uranium has mostly traded around $40 per pound, less than half the current spot price.
Simply put, the outlook for uranium is very positive at the moment as supply is limited while demand is increasing as a new generation of small modular nuclear reactors stimulate demand for the shiny metal. is. However, the general rule for investing in uranium is that once the price exceeds $60, the prospect of profit will encourage miners to mine more, increasing supply and lowering the price. The price of uranium is now well above that $60 mark, meaning that miners around the world are almost certainly preparing to mine even more uranium.
In short, enjoy this rally in uranium stocks while it lasts. Because while it may last for months or even years, it won’t last forever.
Should you invest $1,000 in Uranium Energy right now?
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Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
Uranium stocks soared today.Should I buy any? Originally published by The Motley Fool
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