Scoop Up These 2 Uranium Stocks on the Dip
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Uranium spot prices skyrocketed from $30 USD/lb to more than $50 USD/lb beginning in August of 2021. A significant reason for this rally is the world’s transition towards decarbonization and sustainable energy, which has increased the role of nuclear energy.
However, in the past week prices have fallen more than 15% to $42.70. Which means now could be a good time to buy the dip, as uranium is expected to grow over the coming decades. The 2021 edition of the World Nuclear Association’s report reveals a 27% increase in uranium demand between 2021 and 2030. This trend should continue, increasing uranium demand by 38% during 2031-2040.
Today I will analyze two uranium stocks, Ur-Energy Inc. (URG), Uranium Energy Corp. (UEC), that should benefit from increased uranium prices over the coming decade.
Ur-Energy Inc. (URG)
Based in Littleton, Colorado, Ur-Energy Inc. is engaged in the exploration, mining, and processing operation of uranium.
Since the beginning of the year, shares of URG are up around 133.4%, outperforming its benchmark as well as the broader market.
Financial Performance & Analysts Outlook
On November 1st, Ur-Energy reported earnings for the third quarter of 2021. In Q3, the company’s revenue was reported at $9,000, beating Wall Street estimates by $9,000. However, the company does not plan to sell its uranium inventories in 2021, which is why its revenues may continue to be near the zero thresholds. Its third-quarter GAAP EPS stood at ($0.04). However, URG failed to beat analysts’ estimates, missing by ($0.02) in EPS.
The most interesting fact in its report is the company currently holds 285,000 pounds of ready-to-sell uranium in inventory at a conversion facility. The company said the inventory has a dollar value of about $13.4 million.
Additionally, the company has a healthy balance sheet with a strong liquidity position. As of September 30th, 2021, it had total cash of $33.4 million, which is a significant increase compared to the December 31st, 2020 figure of $4.3 million. With a total debt of $12.3 million, its total net cash stood at $21.07 million. Considering the cash burn rate of $9.1 million for the nine months ended September 30th, 2021, the company won’t likely face any liquidity problems for the next 24 months.
Analysts have a bullish outlook regarding URG, expecting its sales to stand at $15.4 million in 2022. Moreover, they expect URG sales to rise by 584% on a year-over-year basis to $90 million in 2023.
According to TipRanks, URG has an average price target of $2.46, representing a 31.55% upside from the current levels.
Uranium Energy Corp. (UEC)
Founded in 2005, Uranium Energy Corp. is a Texas-based uranium mining and exploration company that operates in the United States, Canada, and Paraguay. The company owns interests in different projects, which includes the Palangana mine, Goliad, Burke Hollow, Longhornand others.
Year-to-Date (YTD), shares of UEC have advanced about 152.8%, which is well above the broader market and its benchmark URA.
Financial Performance & Analysts Outlook
On October 28th, the company delivered an annual report for the fiscal year ended July 31nd, 2021. So, let’s take a look at the highlights.
UEC’s current uranium inventories come in at 1.2 million pounds, which translates into $56.7 million based on a spot price of $47.25 per pound. In addition, the company has expanded its physical portfolio of U.S. warehoused uranium to 4.1 million pounds, with an average cost of $32 per pound. Uranium Energy continues to increase its pipeline with low-cost ISR projects, which can potentially produce 4 million lbs. per year in Texas and Wyoming alone.
UEC also has a strong liquidity position, with $44.31 million of cash on the balance. In addition, the company decreased its total debt from $18 million to $10 million in 2021, resulting in a net cash position of $26.3 million. The company’s cash burn rate, excluding purchases of uranium concentrates, stood at $12.51 million. Based on that, I would expect the cash on hand to be sufficient for at least 12 months.
According to CNN Business, one of the company’s largest institutional shareholders, Exchange Traded Concepts LLC, bought 2.6 million shares of UEC during the third quarter of 2021, growing its total stake to 3.39%. The increasing institutional activity could be considered as a strong bullish sign for the company.
Analysts expect Uranium Energy’s revenues to grow to $25.5 million in 2023 and $78.4 million in 2024.
Analysts have established a “Moderate Buy” rating for UEC, with an average price target of $5.60.
