The global shift towards clean energy solutions is inevitable, and nuclear power is expected to play a key role in this transition. In fact, several developed and emerging economies, such as the U.S., China, and India, are looking to generate electricity via nuclear power to support and fuel their economic growth in the next two decades.
Nuclear power is a cleaner source of energy compared to fossil fuels, and should complement other renewable energy sources such as hydro, wind, and solar. Uranium (UXM24) is an essential fuel required to power nuclear reactors, making uranium mining stocks quite attractive right now.
Industry forecasts suggest the global uranium market size could grow to $3.27 billion in 2027, up from $2.65 billion in 2021. Notably, one report states, “The global building and enlargement of nuclear power facilities is one factor driving up uranium consumption. Infrastructure for nuclear energy has been invested in as a result of growing worries about climate change and the need to lessen dependency on fossil fuels.”
One uranium mining stock that has delivered outsized gains to shareholders in recent years is Cameco (CCJ), a Canada-based company. Valued at a market cap of $20.98 billion, Cameco Energy stock has returned over 300% to shareholders in the last five years, and earlier this month rose as high as $52.64 - in territory it hasn't explored since late 2007.
In addition to capital gains, the uranium miner also offers shareholders an annual dividend of $0.09 per share, indicating a forward yield of 0.19%.
Let’s see if Cameco should be part of your equity portfolio right now.
A Strong Performance in 2023
Cameco's sales increased 39% year-over-year in 2023 to $1.88 billion, and net income surged over 300%. Moreover, Cameco more than doubled its operating cash flow in the last 12 months.
Given that uranium demand is forecast to remain robust in the upcoming decade, Cameco’s growth story appears to be far from over. Analysts expect CCJ to increase sales by 18% year-over-year to $2.22 billion, while adjusted earnings are forecast to expand by 56% to $0.89 per share.
Wall Street forecasts Cameco's earnings to increase by 48% annually in the next five years. So, Cameco might end 2028 with earnings of $4.10 per share. With CCJ stock priced at 30x forward earnings, the mining stock should surge over 150% in the next four years. A widening earnings base should also support consistent dividend hikes for Cameco, which has tripled its dividend payouts in the last 20 years.
Cameco recently announced the acquisition of Westinghouse Electric in a joint venture with Brookfield Asset Management (BAM), one of the largest alternative asset managers globally. Over 430 nuclear reactors currently use Westinghouse’s technology, and the acquisition should be accretive to Cameco over time. Cameco owns a 49% interest in Westinghouse, and Brookfield owns the rest.
What Is the Target Price for CCJ Stock?
Earlier this month, investment bank Goldman Sachs (GS) assigned Cameco a price target of $55, which is about 15% higher than the current trading price. Goldman Sachs analyst Neil Mehta has a “buy” rating for the mining stock due to its leading market position and increasing demand for uranium, both of which should benefit Cameco.
Out of the 12 analysts covering CCJ stock, nine recommend “strong buy,” while only two recommend “moderate buy” and one recommends “hold.”
The average target price for CCJ stock is $57.78, indicating an expected upside potential of more than 20% from current levels.
On the date of publication, Aditya Raghunath 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.
