Nexgen Energy (NXE) is an exploration and development stage company valued at $4.3 billion by market cap. It is involved in the acquisition, exploration, and development of uranium properties in Canada. The Canada-based uranium miner holds a 100% interest in the Rook I project, which consists of 32 neighboring mineral claims totaling 35,065 hectares located in the Athabasca Basin.
Generally, the share of prices of mining companies are tied to the commodity they mine, making them cyclical in nature. Uranium prices (UXJ24) have been on an absolute tear, rising to more than $100 in early 2024, up from its all-time low of $18 in 2016. Due to rising commodity prices, shares of Nexgen Energy are up 120% in the last 52 weeks, and have gained over 2,500% in the last 10 years.
The Bull Case for Uranium Miners
The demand for uranium is expected to increase in the next three decades as countries continue to fight climate change. The worldwide shift towards clean energy sources is inevitably driving the demand for uranium higher, as it plays an integral role in nuclear power. At the same time, the uranium market is battling a supply crunch, which creates an underpinning of support for prices.
Right now, nuclear power accounts for 10% of the global electricity mix, and this number could increase to 25% over time. According to a report from Visual Capitalist, there are 436 operational nuclear reactors in the world with 173 more under development. Countries such as the U.S., France, and China account for roughly 58% of uranium demand. Additionally, India disclosed plans to construct 18 civil nuclear reactors by 2032, boosting its nuclear generation to 2.42 gigawatts and tripling its current capacity.
As several countries are investing in nuclear energy, there may be a supply gap of 680,000 metric tons for the sought-after commodity by 2040. Right now, it takes between 10 to 15 years for new mines to become operational, which means the supply deficit may be bridged by activating dormant mines.
Uranium demand tied to nuclear reactors is forecast to increase by 28% by 2030 and might double by 2040, says the World Nuclear Association, making miners such as Nexgen enticing investment choices right now.
Is Nexgen a Good Uranium Stock to Buy?
The growing demand for uranium is bound to benefit miners such as Nexgen. The company just passed the 10-year anniversary of discovering Arrow. Once operational, the mine should drastically reshape the Western supply landscape.
For example, according to a feasibility study conducted in 2021, the Arrow mine might deliver up to 30 million pounds of uranium each year, representing 20% of current uranium fuel production and over 50% of Western supply. The mine will re-establish Canada as a leader in uranium production, emphasizing Nexgen’s unique position to meet global requirements.
What Do Analysts Forecast for Nexgen Energy Stock?
Scotia Capital, an investment firm, initiated coverage on Nexgen Energy stock earlier this month with an “outperform” rating. In an investor note, Scotia Capital explained, “Despite capacity restarts, we forecast the uranium market to remain in a multi-year structural net deficit position, due to massive planned reactor build in China and the dual Western world agenda of decarbonization and energy independence.”
Out of the eight analysts tracking Nexgen Energy stock, four recommend “strong buy” and four recommend “moderate buy.” The average target price for Nexgen stock is $9.73, indicating an upside potential of 23.3% from current levels.
