Uranium (UXM24) prices soared earlier this year, after Kazatomprom - the world's biggest uranium producer - warned of its inability to reach production targets for the next two years. Reports suggest the global uranium market will grow to $11.39 billion by 2030, driven by revived demand from the nuclear industry, so the current supply crunch has effectively driven commodity prices higher.
Stocks tied to uranium miners have also been in focus, but one small-cap miner in particular is attracting attention for its rare earth business - which analysts say could give the company an edge over its uranium peers. Here's a closer look.
About Energy Fuels Stock
Energy Fuels (UUUU) is a Colorado-based uranium mining company. They mine and produce natural uranium using conventional in situ mining methods. They also hold stakes in various uranium and vanadium projects across the Arizona Strip, Grants, Powder River Basin Districts, and Colorado Plateau. Valued at $854 million by market cap, the company was incorporated in 1987.
UUUU stock is down 26% on a YTD basis. The shares fell more than 9% in Monday's session on news of a roughly A$375 million cash and stock deal to acquire Base Resources, a mineral sands producer and developer. The combined company will be worth upwards of $1 billion on a pro forma basis.
Energy Fuels Q1 Earnings Approach
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%.
The company is expected to report its full Q1 earnings on May 3, with Wall Street looking for a profit of $0.02 per share - up from a loss of $0.01 per share in the year-ago quarter.
What Do Analysts Expect for UUUU?
Analysts are very positive on UUUU, with a consensus “Strong Buy” rating and a mean price target of $10.37 - indicating an upside potential of 95.6% from current levels. Currently, 7 analysts are covering the stock, 6 of which have a “Strong Buy” rating, while the 1 remaining analyst has a “Moderate Buy” rating.
Last Thursday, B Riley initiated coverage on Energy Fuels with a “Buy” rating and a price target of $9, indicating expected upside of 69.8%.
B Riley analyst Matthew Key notes that UUUU has the potential to create robust earnings from its vanadium and rare earth business, which he describes as a key differentiator for Energy Fuels among its uranium producing peers.
While investors reacted negatively to Monday's M&A news, it's worth pointing out that the deal should help Energy Fuels to lock in the monazite supply that Key thinks will be crucial to help boost earnings going forward. The deal gives UUUU access to the Toliara project in Madagascar owned by Base Resources, and monazite production from the asset will be processed at Energy Fuels' White Mesa mill.
On the date of publication, Ruchi Gupta 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.
