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4 Big Reasons Uranium Energy Stock Surged This Week


What happened

Uranium Energy (NYSEMKT:UEC) stock has become unstoppable — after a dizzying rally in the month of October, the uranium stock shot up another 18.3% this week as of 2:30 p.m. EST Friday, according to data from S&P Global Market Intelligence.

Four major catalysts drove the stock higher: higher uranium prices, big news coming in from the nuclear energy industry that forms the backbone for uranium companies, a mega-growth move from Uranium Energy, and an analyst upgrade.

So what

Earlier in November, Bloomberg reported that China is planning to build as many as 150 new nuclear reactors over the next 15 years. Investors who have followed the uranium industry closely will know how the deadly Fukushima Daiichi nuclear disaster of 2011 closed the doors on nuclear reactors worldwide, and with it, on the businesses of uranium miners as uranium is the key fuel that power nuclear reactors.

Unsurprisingly, the news was hugely cheered on by investors in uranium stocks as the construction of so many nuclear reactors could potentially secure the future for the uranium industry.

Image source: Getty Images.

Uranium Energy doesn’t want to miss the growth bus and, therefore, announced this week it’ll acquire substantial uranium assets for $112 million in cash from Uranium One, the world’s fourth-largest uranium producer.

The acquisition includes seven projects in Wyoming’s Powder River Basin, including one of the largest central processing facilities in the U.S. with an annual licensed capacity of 2.5 million pounds of uranium. Moreover, some of the assets are also production-ready, giving Uranium Energy a base to start generating revenue right away.

That’s a huge growth leap; just days ago, I’d highlighted how Uranium Energy hasn’t generated any revenue since 2015 and has been buying uranium in the spot market instead in recent months to sell them later at higher prices and make some money. Now, with its physical inventory of 4.1 million pounds of uranium and in-situ recovery production capacity of 6.5 million pounds per year, Uranium Energy will potentially become one of the largest uranium mining companies in the U.S. after the acquisition.

Soon after the announcement, H.C. Wainwright increased its price target on Uranium Energy stock to $7 a share from $5.60 per share. The stock is hovering around $5.50 a share as of this writing.

Now what

There’s no denying Uranium Energy just made a huge growth leap, and the timing couldn’t have been better as uranium prices are on the rebound after several years. As of this writing, prices are hovering around $46 per pound. Uranium prices slumped dramatically at the end of September after hitting nine-year highs of $50.80 per pound earlier in the month.

This acquisition could be a game changer for Uranium Energy, so it’s no surprise investors are bidding the small-cap uranium stock higher.

                                        This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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2021-11-12 15:06:00

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