Why BofA Is Raising Its 2022 Uranium Price Forecast By 41%
Uranium stocks are the latest to grab the attention of Reddit’s WallStreetBets community, and surging uranium futures prices have prompted one Wall Street analyst to raise his triuranium octoxide price targets.
The Analyst: On Tuesday, Bank of America analyst Lawson Winder reiterated a Neutral rating on Cameco Corp (NYSE: CCJ) and raised the price target from $20 to $29.
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The Thesis: Winder increased his 2021 triuranium octoxide price target by 18% to $36.30. He also raised his 2022 target by 41% to $53.50 and his 2023 target by 18% to $48.50.
In the last month, the price of uranium futures has jumped about 40% to around $42.40, roughly a seven-year high.
In that same stretch, Cameco shares are up 47.1%, and Winder said Tuesday that rising uranium prices are already reflected in Camecon’s stock price at this point.
He said the stock will likely continue to be volatile in the near-term given it is the only large, liquid U.S. stock with significant exposure to uranium.
“We however believe that any potential short-term spike in prices would prove temporary. We see our current outlook as largely reflected in the shares,” Winder said.
Winder said the Sprott Physical Uranium Trust (OTC: SRUUF) alone has increased global demand by about 3% since Aug. 17. Winder said producers will certainly respond to the price spike by ramping up supply, but that new supply will take a bit of time to come online. Meanwhile, Winder said the SRUUF fund will likely continue to trade higher.
In addition to Cameco, several OTC-traded uranium penny stocks have experienced extreme volatility this week. In the past five trading days, Peninsula Energy Ltd (OTC: PENMF) shares are up 40.1%, Energy Resources of Australia Limited (OTC: EGARF) is up 40.2% and Yellow Cake PLC (OTC: YLLXF) shares are up 23.2%.
Benzinga’s Take: Uranium is the latest meme investment to take social media by storm, and pouring retail trading volume into relatively illiquid OTC-listed uranium stocks has certainly created some extreme near-term volatility.
Uranium prices may continue to drift higher in the near-term until more supply comes online, but traders can expect uranium stocks to eventually follow a similar longer-term trajectory to most of the low-float meme stock short squeeze trades of 2021.
Latest Ratings for CCJ
Dec 2020 | RBC Capital | Downgrades | Sector Perform | Underperform |
May 2019 | TD Securities | Downgrades | Buy | Hold |
Nov 2018 | RBC Capital | Maintains | Sector Perform | Sector Perform |
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