With demand rising for cleaner sources of energy, spot uranium prices have skyrocketed 229% since 2020 - and as the world’s largest uranium producer faces supply constraints, prices could be set to rise again. Against this backdrop, here is one uranium stock that analysts believe is well-positioned to capitalize, with Wall Street predicting significant upside over the next 12 months.
What's Driving Uranium Prices?
Back in 2011, the Fukushima disaster in Japan had governments all around the globe rethinking the future of the nuclear industry. Major economies, including Japan, Germany, Italy, and Belgium, announced plans to scale back or wind down nuclear energy development.
Over a decade later, an increased urgency to address climate change - along with the impact of fossil fuel supply disruptions tied to the war in Ukraine - have sparked new interest in nuclear power. At last year's COP28 climate conference, 22 international leaders agreed to triple nuclear capacity by 2050.
As demand for nuclear energy increases, demand for uranium (UXU24) as a fuel increases simultaneously. Sure enough, in January, the U.S. Energy Department said it would solicit bids to produce high-assay low-enriched uranium (HALEU) as it aims to boost nuclear fuel production and strengthen national security.
That's why uranium mining stocks popped in mid-January, shortly after the DoE announcement, when Kazatomprom warned that a sulphuric acid shortage would negatively impact its uranium production levels this year. While the world's largest producer of uranium is working to address shortages of the key mining material, the company said its production plans going into 2025 “may be at risk” if sulphuric acid access remains limited through 2024.
For investors looking to take advantage of a longer-term rise in uranium prices, here's one stock with major upside potential, according to analysts.
About Energy Fuels Stock
Energy Fuels Inc. (UUUU) is a Colorado-based critical minerals company. It mines uranium, with the largest uranium production capacity and most authorized mines in the U.S., and sells it to nuclear utilities. In addition to mining uranium, Energy Fuels also produces rare earth minerals and vanadium.
UUUU stock has been in the red this year, down nearly 15% YTD. The company has a market cap of $986 million.
Energy Fuels released their full year 2023 earnings report on Feb. 23, with revenue up 203% year-over-year to $37.9 million, while earnings checked in at $99.76 million, or $0.63 per share. The mining company ended the year with no debt, and over $220 million in liquidity - up from $116.97 million at the end of FY 2022.
In 2024, management expects to sell 200,000 to 300,000 pounds of U3O8 into its existing portfolio of long-term uranium contracts. During Q1, 200,000 pounds were sold at a realized price of $75.13 per pound, yielding a gross profit of $38.29 per pound, or gross margins of 51%.
Also in Q1, Energy Fuels contracted to sell an additional 100,000 pounds of uranium at an average price of $102.88 per pound, for an expected gross profit of approximately $66.04 per pound - yielding a gross margin of roughly 64%.
Is Energy Fuels Stock a Buy?
There is a strongly bullish sentiment among analysts for UUUU stock, with a consensus “Strong Buy” rating and a mean price target of $10.64. This indicates expected upside potential of 73.8% to current levels. Out of the 5 analysts covering the stock, 4 have a “Strong Buy” rating and 1 has a “Moderate Buy” rating.
