What should you do now?
Written by Stéphanie Bedard-Chateauneuf, MBA at The Motley Fool Canada
After blowing up in late August and early September, uranium stocks began to collapse on September 17. What are the causes of this liquidation of uranium stocks? Although the International Atomic Energy Agency has significantly increased its long-term estimate of nuclear power, a general market downturn, mixed prospects for Morgan stanley, and the news from China all weighed on uranium stocks. Cameco (TSX: CCO) (NYSE: CCJ), the world’s largest publicly traded uranium company, was not spared. Should we buy this share now? Let’s take a closer look at Cameco’s stocks to determine if it’s a good buy when it’s down.
Cameco recently hit a 52 week high
Cameco produces and sells uranium. The company operates in two segments: uranium and fuel related services. It also produces fuel bundles or reactor components for reactors. Cameco sells uranium and fuel services in the Americas, Europe and Asia.
As the chart shows, Cameco shares bottomed out in March 2020 at $ 9.07 per share. The stock has hit higher lows and highs, with the most recent September 15 at $ 31.22. The shares are now trading around $ 26.
The price development since August 19 shows the high level of volatility in Cameco’s shares, which reflects the evolution of uranium prices since mid-August.
The chart shows the fall from a low of $ 20.04 on August 19 to a high of $ 31.22 less than a month later on September 15. Cameco shares soared 55.8%.
At the level of $ 27.52 on September 30, the stock corrected 11.85%. But Cameco is still in an uptrend, supported by rising uranium prices.
What caused the rally in uranium stocks?
Cameco shares and uranium prices have gained attention since mid-August, as uranium has joined many other commodities with substantial rebounds in recent months.
Uranium stocks have exploded this year due to two factors. First, President Joe Biden announced in January that billions would be invested in clean energy initiatives. This included the use of current clean energy assets, such as nuclear reactors. This pushed uranium prices up after a decade of virtually zero growth, as it was linked to the Fukushima disaster in 2011, which brought uranium prices down.
The recent rally in uranium stocks may also be due to WallStreetBets, a subhead of the Reddit social media aggregate. Retail traders have bought out companies under a “pump and dump” system, trying to increase inventory before dumping inventory at a lower price.
Cameco is one of the best stocks of uranium
The demand for nuclear power is likely to increase as the world moves away from fossil fuels. As a world leader in uranium production. Cameco stocks are probably the most important name among uranium stocks. Cameco has more upside potential as it has a strong asset base.
The company currently has the capacity to produce over 53 million pounds of uranium concentrates. Additionally, with 455 million pounds of proven and probable mineral reserves, the company has long-term growth and cash flow visibility.
For the second quarter, the company reported revenue of $ 359 million and gross profit of $ 12 million. As operations ramp up, key margins should improve. In the uranium segment, the company expects annual sales of $ 995 million. Cameco reported cash and cash equivalents of $ 1.2 billion in the second quarter. The company also has an unused credit facility of $ 1 billion. Therefore, there is great financial flexibility to pursue aggressive growth in exploration and production.
Production for the year from owned and operated properties is expected to reach six million pounds. Given the company’s licensed production capacity, there are many opportunities to scale up operations if the uranium uranium trend continues.
The Aftermath Uranium stocks have finally cooled down: what to do now? first appeared on The Motley Fool Canada.
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Silly contributor Stéphanie Bedard-Châteauneuf has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.