The nuclear energy revolution is here. Are you ready to join the movement? Cameco (NYSE: CCJ) is an extraordinary business operating in an industry with solid growth potential. I am bullish on Cameco stock because of the company’s high-conviction mining projects and dividend payments (albeit small) and because CCJ shares are trading at an attractive price now – from a technical perspective.
Cameco is a Canada-based uranium miner. As we’ll discover, CCJ stock has favorable analyst ratings and price targets. Furthermore, Cameco’s position as a leader in the nuclear fuel market is assured because the company controls vast uranium reserves.
Plus, Cameco just marked a production milestone at one of the company’s main uranium assets. First things first, though: To be bullish on CCJ stock, you’ll need to envision the upside in the uranium market So, let’s start with that.
The Uranium Supply/Demand Imbalance
Here’s an alarming statistic. The International Energy Agency World Energy Outlook estimates that there will be a 75% increase in electricity demand from 2020 to 2050. With many developed nations striving to reduce their fossil fuel usage, how will all of this electricity be produced? The solution could be nuclear power – but this implies an imbalance between uranium supply and demand.
It’s been over a decade since Japan’s Fukushima nuclear power plant meltdown, so it seems that the world may be ready to embrace nuclear energy again. Uranium is cleaner than you might think it is, and due to the powerful demand for clean-energy fuel sources, uranium rallied in 2022 and ended the third quarter at roughly $48 per pound.
Yet, it wasn’t all about demand, as the supply side of the equation also supported higher uranium prices. There’s transportation risk in Russia due to that country’s invasion of Ukraine. Russia supplies around 14% of the global nuclear industry’s supply of uranium concentrates, and geopolitical disruptions have made it harder for nations to source uranium for nuclear power.
Ideally, the solution would be to get uranium from a North American supplier. Cameco has uranium operations in Kazakhstan, which isn’t very far from Russia geographically, but also in Canada and the U.S. In other words, Cameco is well-positioned to meet the ongoing demand for uranium as countries turn to nuclear fuel in the coming years.
CCJ Stock Magnifies Uranium’s Moves and is at a Support Level
If you’re looking for a pure play in uranium, you can trade in the futures markets. However, not everyone has the ability or the desire to buy and sell futures contracts. Thankfully, there’s an easier way, and you can even get some leverage to the moves in the uranium price, as CCJ tends to move faster than Uranium – and that happens to be a great reason to consider picking up some shares of CCJ stock.
The timing is auspicious, as Cameco stock has already bounced off of the $20 level (give or take a dollar or two) multiple times this year. CCJ stock might not be exactly $20 when you read this, but trading isn’t always a textbook-perfect, exact science.
Cameco also pays dividends every three months. Its forward annual dividend yield of 0.41% might not sound spectacular, but bear in mind that uranium itself (and the futures based on uranium) doesn’t pay any dividends at all.
Cameco Controls and Develops Prime Canadian Uranium Projects
Before you consider investing in any mining business, be sure to check the company’s assets. In Cameco’s case, the company’s operations span 464 million pounds of proven and probable mineral reserves. Cameco has notable uranium assets in Kazakhstan and the U.S., but its crown jewels are really located in Canada.
Specifically, Cameco’s Canadian uranium assets are located in Saskatchewan – at the Cigar Lake, Rabbit Lake, and McArthur River/Key Lake sites. Not long ago, the company revealed a milestone moment at one of its Canadian properties, as the “first pounds of uranium ore from the McArthur River mine” were “milled and packaged at the Key Lake mill.”
Due to a soft uranium market from 2018 to 2022, Cameco suspended production at McArthur River and Key Lake for a while. Now, with the supply-demand balance tipping in uranium’s favor, Cameco was able to restart operations at this property. Consequently, Cameco reports, “McArthur River/Key Lake are expected to produce up to 2 million pounds (100% basis) of uranium concentrate (U3O8) in 2022.”
Is CCJ Stock a Buy, According to Analysts?
Turning to Wall Street, CCJ is a Strong Buy based on five unanimous Buy ratings. The average Cameco price target is $32.43, implying 46.7% upside potential.
Conclusion: Should You Consider Cameco Stock?
Now that McArthur River and Key Lake are back in business – and now that developed nations are on board with nuclear energy – it’s definitely time for investors to consider Cameco stock.
CCJ stock tends to magnify the price moves of uranium, so it’s wise to maintain a small position size. So, feel free to consider Cameco stock while it’s sitting near a key support level. The pro-uranium movement should keep gaining momentum in the 2020s and beyond.