The Sprott Uranium Miners ETF (ARCA:URNM) and the Sprott Physical Uranium Trust (TSX:U.U) were both up in the past week, with the former up 9.1% and the latter up 12.71%. In addition to the interest rate tailwind, uranium prices should continue to rise in 2024 in an environment of supply concerns and growing demand.
On the TSX, Cameco (TSX:CCO) shares have risen 81% over the last year, making it one of the hottest stocks in the commodities space. Now, with the company about to report earnings, investors may be wondering if it’s a good time to buy this stock ahead of the earnings report.
Cameco shares hit an all-time high on the 15th of last month, and the stock has fallen back only slightly during that time. At the company’s recent investor day, Cameco management said it remains “very well-positioned” with nuclear utility customers, and Cameco continues to view uranium as a key alternative to oil and gas companies. Cameco continues to view uranium as a major alternative to oil and gas companies, and with the unprecedented increase in demand for electricity, more uranium will be needed to provide power in the future.
Most importantly, Cameco’s existing mines can comfortably meet those needs. As a result, the company is in no rush to explore or acquire other uranium projects at this time, so there is little pressure for additional capital expenditures, which is very favourable to the company’s balance sheet.
Uranium prices were recently near $87 per pound. Analysts expect that if and when the uranium price pulls back, Cameco’s stock will likely react the same way. The question is whether the stock pullback is simply based on a normal reaction to lower commodity prices, or whether it’s because this uranium stock has become so overvalued in its big run-up over the past year that it’s had to be repaired.
Some analysts believe a pullback in Cameco’s share price is inevitable, even if the upcoming earnings report meets or slightly exceeds expectations. At the same time, a subset of analysts raised their price targets on the uranium stock after the investor day, citing long-term contracts that put the stock on a solid path. This will provide downside protection in case the spot price falls.
What needs to be clear for investors is that the world needs decarbonisation solutions and Cameco is one part of providing those solutions. The company still has enough mines on hand to meet demand, so it can continue to collect cash if it needs to expand. For now, Cameco remains a top choice for investing in uranium as spot prices remain high. The company is scheduled to report its results on Thursday, 8 February.