Cameco Corporation stock price benefitted from a short-term squeeze and is poised to rise further amid increasing interest in uranium.
The stock price of Cameco Corporation (NYSE: CCJ), the world’s largest uranium producer, grew by triple digits over the past year. This is as a result of a growing interest from institutional and retail investors in uranium amid the worrying effects of climate change. However, Cameco shares have relatively low-profit margins and bleak short-term growth prospects. Whether this renewed meme investor interest will help the company attain new highs is a matter of time. Although the company leads in publicly traded uranium manufacture and supply, some think Cameco’s stock price is currently overvalued.
Uranium prices recently attained a six-year high, owing largely to a big buying spree from Sprott Physical Uranium Trust. The world’s largest fund holding physical uranium began purchasing the mineral since its inception in July. Sprott Physical Uranium Trust has accumulated almost 25 million pounds worth of uranium. Last week, the fund bought 850,000 pounds worth in a single day.
Generally, Uranium futures climbed by 40% to $42.50 in just under a month, according to data from FactSet.
In addition, an increased number of retail investors in the commodity drove CCJ to a price gain of 123.6% over the past year. This represents an 82.5%-year-to-date gain overall. Other uranium stocks also moved higher. They include exploration company Uranium Energy Corp (NYSE: UEC), up 4%, and London-listed miner Aura Energy (LON: AURA), up 34% on Monday. However, the recent low-profit margins and bleak growth prospects suggest this momentum might be short-lived.
Cameco Stock May Rise As It Leads Global Uranium Production
Cameco Corporation sees itself as a company spearheading the clean-air movement amid global efforts to reduce carbon emissions. Many now believe that nuclear energy is a good alternative power source, with uranium as a currency primary fuel component.
According to UxC nuclear fuel consultancy president, Jonathan Hinze:
“There are only a few options to produce electricity without releasing CO2.”
Hinze further stated that achieving decarbonization without nuclear power might be impracticable. Bruno Brunetti, head of Global Power Planning Analytics, S&P Global Platts, also stressed the importance of nuclear energy as a reliable alternative. In Brunetti’s words:
“As there is growing momentum to achieve net zero [carbon emissions], governments will soon realize that nuclear [power] is currently overlooked.”
Cameco has a licensed capacity to produce 53 million pounds of uranium every year. The company has the wherewithal to achieve this with its 455-million-pound proven mineral reserves. Also, CCJ stands to gain owing to the short uranium squeeze as a result of the Reddit forum. Interest generated on the Reddit WallStreetBets forum was sufficient enough to see the company’s stock climb 60% in over three weeks. Furthermore, share prices were closer to 3% in late morning trading.
China recently increased its efforts on the nuclear energy front. The Eastern nation commissioned over 60% of new plants globally within the last decade.
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