3 Uranium Stocks With Strong Buy Ratings: Summer 2024
Investors eyeing growth should consider top uranium stocks. As AI and tech demand high energy, the U.S. power grid may struggle. Despite the efficiency of advanced technologies, substantial energy consumption (and incredible growth on this front) is unavoidable. Uranium’s energy density makes it a crucial power source for humanity’s future needs.
Notably, Kazakhstan’s plan to raise uranium’s Mineral Extraction Tax (announced on July 10) has spurred considerable investor interest in the sector. Effective January 1, 2025, the tax will rise from 6% to 9%, with more complex rates set for 2026 based on production and uranium prices. Rates will range from 4% to 18% depending on output, and increase further with higher uranium prices.
To ride the surging uranium sector, here are three uranium stocks to own now.
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Cameco (CCJ)
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Uranium miners like Cameco (NYSE:CCJ) have the potential to power the technological innovations of tomorrow. Such tech innovations require immense energy, straining the U.S. power grid, highlighting the growing need for nuclear energy.
Cameco, in partnership with Saskatchewan Polytechnic, recently enhanced its jet boring machine using AI to adapt extraction methods to rock types, improving efficiency. This shift from manual programming to automated adjustments helps tackle mining challenges like productivity and safety. Deloitte noted that while AI isn’t a cure-all for uranium production, it aids in decision-making, reducing errors and improving the environmental impact of mining.
Supply and demand issues remain pressing within the uranium sector. With 90 nuclear plants planned and 61 under construction, supply remains very tight, especially with the Russian uranium ban starting August 11. This could push uranium prices above $100. Additionally, Kazakhstan’s rising uranium taxes, effective January 2025, could further strain supply and impact prices.
Uranium Energy (UEC)
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Higher uranium prices will benefit Cameco and Uranium Energy (NYSE:UEC), but the latter could stand to gain more. Uranium Energy, with no current operating mines, holds a valuable stockpile of uranium bought at low prices. The company plans to sell this stockpile for profit and use the funds to develop its planned mines, starting with a reopening in August 2024.
Without using long-term contracts or hedging its position, Uranium Energy will directly benefit from recent surges in uranium prices. As of January, the company held 1.17 million pounds of uranium at $54 per pound and has contracts for another 1 million pounds at $39 per pound.
Uranium Energy faces a number of risks, as the company has yet to produce uranium and mining challenges may arise. Despite this, its growing portfolio and lack of long-term contracts position it to outperform Cameco. With uranium prices expected to rise due to supply-demand shifts and new high-cost mines coming online, Uranium Energy could be a top stock to benefit from these trends.
Ur Energy (URG)
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Ur Energy (NYSEMKT:URG) operates a number of uranium projects across Nevada and Wyoming, with significant potential in the Lost Creek Project. Currently trading around $1.40 per share, many technical analysts expect an eventual breakout through the $1.80 level. If URG stock continues to see strong price momentum, this is a stock that could be worth diving into, given growing global energy demand and increasing interest around renewable energy.
The company is burning through approximately $36 million in cash annually, with only $54 million in reserves. Thus, investors have around 18 months of runway before the company needs to produce cash flow. Analysts expect the company to reach a cash flow break even sooner. But, of course, nothing is certain.
That said, in Q1 2024, Ur-Energy boosted production and signed six new sales agreements amid a U.S. Senate-backed Russian uranium ban. The company ended the quarter with $53.9 million in cash.
Ur-Energy is speculative in this space, with a Q1 2024 loss of $0.07 per share versus the expected $0.03 loss. Despite a high 42-times revenue multiple, fiscal 2024 projections suggest a 110.5% revenue increase. It’s a high-risk, potentially high-reward uranium stock worth adding to the watch list right now, in my view.
On the date of publication, Chris MacDonald did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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