Uranium prices have skyrocketed since Russia invaded Ukraine, and one analyst said Tuesday that investors can expect upward pricing pressure on uranium to persist for the foreseeable future.
The Analyst: Bank of America analyst Lawson Winder reiterated his Buy rating for integrated uranium producer Cameco Corp (NYSE:CCJ) and raised his price target from $32 to $37.
The Thesis: In his new note, Winder said surging uranium prices are an undeniable tailwind for Cameco and other uranium-exposed stocks.
The price of triuranium octoxide (U3O8) is up 47% since the Russian invasion began, and Winder said much of the price action has been driven by the Sprott Physical Uranium Trust (SPUT). Russia currently accounts for 17% of the total global supply of U3O8. Russia also accounts for around 29% of global uranium conversion and 46% of global uranium enrichment capacity.
Related Link: Why Ukraine's Infrastructure, Resources Are Pivotal To The Global Economy
"With pressure on conversion pricing, this is positive for CCJ’s conversion business, which we estimate is currently operating at around 70% capacity and could ramp up to capture higher conversion pricing," Winder said.
Cameco is currently the world's second-largest producer of U3O8 behind only Kazatomprom (KAP) of Kazakhstan. However, Wider said the fact that 83% of Cameco's assets are located in Canada likely makes it the preferred supplier for Western utilities.
In addition to raising the price target for Cameco, Bank of America also raised its price target for U3O8 by an average of 20% over the next five years. Bank of America is now projecting U3O8 prices of $60.70 per pound in 2022 and $66.90 per pound in 2023.
Benzinga's Take: For Cameco and other stocks exposed to uranium, the trading thesis is clear. As long as the war in Ukraine continues, uranium prices will remain elevated. Even if a peaceful resolution is reached at some point, the terms of the resolution and the status of international sanctions on Russia will determine the impact on uranium prices.
Photo: Courtesy Cameco
