Pulsar Helium Inc. (TSXV:PLSR)
The Force in Helium.
Canadian investors have been watching some stocks rise higher and higher this year, but haven’t made up their minds to invest, and that includes Cameco (TSX:CCO), the biggest uranium listed company in North America. The company’s earnings have improved significantly as uranium prices have strengthened, driving the stock up 86% over the last year.
While stocks in the renewable energy sector have been performed differently, the strong demand for the materials needed to support renewable energy is there for all to see, and that includes uranium. And one question for investors to consider right now is whether Cameco stock has room to rise higher, and is it too late to buy?
There are a number of things driving Cameco stock higher, starting with the fact that uranium prices have been rising in 2023 and 2024. Higher uranium prices mean the company is able to sell more uranium at higher prices, boosting revenue and profitability. After that, Cameco’s investment in Westinghouse Electric, a leading provider of nuclear reactor technology and services, is starting to pay off. This investment gives Cameco a foothold in the nuclear power industry.
From the company’s first quarter 2024 earnings release, the Fuel Services and Westinghouse Electric divisions reported strong operating results in line with management’s outlook and expectations for 2024. Despite reporting a net loss, adjusted net income and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) showed positive trends compared to the same period a year ago.
Additionally, Cameco’s uranium production increased in the first quarter, and the company was able to choose to focus uranium inventory and conversion capacity, as well as long-term contracts to capture upside potential. What’s more, the company now has a strong balance sheet with cash reserves and a strategy focused on debt reduction.
From all the above, it seems like Cameco is a flawless stock right now, but how long can this upward momentum last? In fact, there are more important factors that investors need to consider before deciding to buy Cameco stock, such as the uranium market itself. Demand is driven by nuclear power generation, which now accounts for about 10 per cent of global electricity generation. The World Nuclear Association predicts demand will continue to grow, potentially to 51% by 2040, depending on how quickly new nuclear plants are built and decommissioned.
Second, some analysts predict a shortage of uranium production in the future as existing resources dwindle combined with the time needed to develop new mines. Geopolitical instability in major producing regions such as Kazakhstan could also disrupt supply. Thus, Cameco appears well positioned for future growth, with the risk being that the company’s success will depend on its ability to navigate the complex dynamics of the uranium market.
Cameco stock is committed to meeting the growing demand in the nuclear energy sector. The company is increasingly growing into a strong operator in the uranium market as debt decreases and earnings increase. Cameco stock’s growth should continue for many more years, as the world’s transition to renewable energy sources to continue.
