At first glance, Canada-based Denison Mines (DNN) – an enterprise specializing in uranium exploration, development and production – might seem too big of a risk for most investors to consider. From multiple angles, critics may be right in their charge. Priced at two pennies above a buck, DNN stock certainly carries a treacherous profile. At the same time, speculative investors may want to take a closer look.
First, while nuclear energy carries a challenging reputation because of underlying fears of meltdowns, the overall reality is that nuclear facilities provide safe and reliable power when operating under normal conditions. Further, many safeguards exist to prevent unexpected impacts from sliding into complete catastrophes.
Second, the nuclear power industry commands indelible relevance. In recent years, the political and ideological spectrum has shifted toward green energy solutions. However, according to the Office of Nuclear Energy, nuclear facilities represent zero-emission clean energy sources. Moreover, the industry itself pushes various environmental, social and governance (ESG)-related initiatives.
Recently, Denison Mines released its 2022 ESG Report, which demonstrates the company’s ongoing commitment to sustainability and transparency. Using one example, management reported that it can develop and later decommission a planned uranium project in a manner that will produce fewer residual effects compared to traditional mining and milling operations.
Third, DNN stock should eventually benefit from underlying operational progress. Last week, management announced the discovery of high-grade uranium mineralization at its Moon Lake South project. While shares have been challenged this year, they could pick back up on this encouraging development.
Finally, options traders appear to have taken note. Following the close of the April 21 session, DNN stock represented one of the highlights in Barchart’s screener for unusual stock options volume. Specifically, total volume reached 10,535 contracts against an open interest reading of 181,935 contracts. The delta between the Friday session volume and the trailing one-month-average volume came out to 866.51%.
Further, call volume hit 9,909 contracts versus put volume of only 626. This pairing yielded a put/call volume ratio of 0.06, which on paper dramatically favors the bulls. Looking ahead, the fundamentals seem very attractive for DNN stock.
Upside Catalysts for DNN Stock Are Difficult to Ignore
Early last week, BayStreet told its readers that investors should keep a close eye on DNN stock and other enticing uranium enterprises. “Uranium prices could see higher highs in 2023. All thanks to renewed demand, global support for nuclear power, and geopolitical issues.”
The investment publication and resource also cited the trade journal Northern Miner. “Rising uranium demand and diminishing secondary supplies have spurred an increase in production. Rising long term prices and increased contract volumes are needed to provide the necessary price incentive for uranium producers to bring production back online or start up new projects. That said, uranium supplies remain tight and further price appreciation is anticipated.”
As BayStreet mentioned, that’s a strong catalyst for uranium prices and the underlying mining industry. Further, Russia has tremendous influence over nuclear fuels. Not only that, western sanctions means that several countries are effectively cut off from the nation’s vast hydrocarbon supplies. Such a circumstance will only exacerbate the search for energy alternatives, thus potentially bolstering uranium.
Northern Miner also mentioned that “[a]s the war drags on, we expect that existing nuclear utilities will scramble to cover their uranium requirements. Security of supply concerns might overshadow economics over the next few years, such that we might see additional funding of domestic nuclear programs, R&D, and uranium industry support.”
Keep in mind that it’s not just cynicism that may bolster uranium-related investments like DNN stock. Rather, nothing touches the energy density of nuclear fuel. According to the Nuclear Energy Institute, “[o]ne uranium fuel pellet creates as much energy as one ton of coal, 149 gallons of oil or 17,000 cubic feet of natural gas.”
Therefore, if resource-impacted nations wish to embrace clean and viable energy, they must turn to the nuclear energy industry. In some ways, then, DNN might benefit from a captive audience.
Denison Mines is a Compelling High Risk, High-Reward Venture
Despite the positives underlying DNN stock, the investment understandably cuts a risky profile for conservative investors. For example, DNN’s 60-month beta pings at a lofty 1.82. Representing a measure of volatility, the benchmark equities index will have a beta of 1. Therefore, DNN carries much more volatility than the rest of the market.
As if that wasn’t an ominous enough sign, the Barchart Technical Opinion indicator rates DNN stock a 100% sell. Further, the implication from DNN’s long-term indicators suggest that the trend will continue to be bearish. For the record, shares fell more than 8% since the January opener. In the trailing one-year period, they’re down 26%.
However, on the flipside, Wall Street analysts remain bullish on DNN stock, rating it a “strong buy.” This breaks down to two strong buys and two moderate buys. Further, TipRanks shows that three analysts over the past six months pegged shares to at least double in value. Thus, for the speculator, Denison appears extremely compelling.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
