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In recent times, the stock price of Canada’s uranium mining company Cameco Corp (TSX: CCO) has experienced a slight decline. However, this Tuesday, the stock price rebounded by 2.95% following a positive stimulus from the U.S. nuclear energy industry. Cameco’s stock price has risen by 68% in the past year, and the recent pullback in its stock price may present a buying opportunity.
Buying on the dip is a characteristic usually associated with good stocks. The key question now is, what is the quality of Cameco’s stock? However, before addressing this question, let’s first look at the recent developments in the nuclear energy industry and the trend of uranium prices.
In the past year, the stock market has seen ups and downs, but the nuclear energy sector remains active. Since March 2023, the Global X Uranium ETF (URA) has risen by over 54%, the Sprott Uranium Miners ETF (URNM) by nearly 65%, and the stock price of U.S. uranium miner Uranium Energy Corp (AMEX: UEC) has surged by almost 110%.
The resurgence of nuclear energy is primarily due to nuclear power being a low-carbon energy source that does not emit carbon dioxide during operation. Nuclear reactors produce nearly one-third of the world’s carbon-free electricity, playing a crucial role in achieving climate change goals. Additionally, given various geopolitical factors, energy security has become more crucial. The Russia-Ukraine war and subsequent energy crisis have highlighted the importance of energy independence, with nuclear energy playing a significant role.
Recently, U.S. President Biden signed the 2024 spending bill, including $2.7 billion for the U.S. Department of Energy to enhance domestic uranium production, surpassing last year’s $2.2 billion. Currently, nuclear power accounts for 18% of total U.S. electricity generation, with renewable energy at 22% and fossil fuels at 60%. Therefore, nuclear energy still has significant growth potential in the U.S. and globally in the clean energy transition.
Regarding uranium prices, the current spot price of uranium is above $90 per pound, although it has dropped from the recent high of $106, it is still about 80% higher compared to a year ago. This price level indicates strong demand for uranium, with the market continuing on an upward trend.
Coming back to the initial question. Cameco is one of the world’s largest uranium suppliers, with the largest high-grade reserves globally and low-cost production. The company’s uranium mines include Cigar Lake and McArthur River in Canada, Smith Ranch-Highland and Crow Butte in the U.S., and Inkai mine in Kazakhstan. With the continuous rise in uranium prices, the company has also outlined plans to increase production.
The strong fundamentals of this excellent company, coupled with the improving fundamentals of the nuclear energy industry, are naturally reflected in Cameco’s financial performance. For example, driven by price and volume, the company’s performance blossomed in the fourth quarter: revenue increased by 61%, gross profit doubled, adjusted earnings per share rose by 133%, and operating cash flow surged by 160% to $201 million.
