The prospects for uranium stocks in 2022 have been given a huge boost following a New Year’s Eve announcement by the European Commission.
The EC has proposed integrating gas and nuclear energy in the EU “taxonomy of environmentally sustainable economic activities,” the Guardian revealed, which would label nuclear power as a green energy source, classifying uranium suppliers as green energy stocks. Part of a European effort to find reliable energy sources to solve the energy crunch, the commodity could see a sustained lift over the long term if the EC announcement translates to stock market success.
Beyond Europe there have also been encouraging signs for the commodity. In the US, Bill Gates and Warren Buffett grabbed headlines last year with plans to build a new nuclear site on a disused coal plant in Wyoming, perhaps a symbol for the renewed relevance of nuclear power in a decarbonised world.
How have uranium stocks and the wider sector been performing?
The Uranium theme, represented by the Global X Uranium ETF [URA] on our ETF performance screener, notched an impressive performance over the last year. Uranium stocks propelled the theme 43.03% higher over the past 12 months to Friday 7 January’s close, only behind the Oil Producers theme, despite a less favourable December.
John Ciampaglia, CEO of Toronto-based firm Sprott Asset Management, has been an early beneficiary of uranium stocks’ renaissance. Sprott’s Physical Uranium Trust [U-UN] has seen its assets grow from $630m when it launched in July last year, to just under $1.9bn in December. "It has completely exceeded our expectations. We're quite bullish on 2022. The uranium market has clearly come back to life after a long slumber," Ciampaglia told Yahoo Finance.
Gordon Johnson, CEO of New York-based GLJ Research, has noted a similar turnaround, stating that uranium went from "a four-letter word" to "being very advantageous" in 2021, report Yahoo Finance.
What’s hot right now with uranium stocks?
Other firms joined Sprott in making some eye-catching 2021 returns, which could continue in 2022. Uranium Royalty’s [URC] stock is up 265.71% in the past year and closed last Friday at C$5.12, up an impressive 12.78% on the week. Uranium Energy [UEC] is up 101.04% in the last 12 months and jumped 8.68% just last week, to close at $3.88.
These two uranium stocks form part of the Global X Uranium ETF, with 1.03% and 3.34% weightings respectively. The ETF’s top holding with a 23.1% weighting, Saskatchewan-based uranium producer Cameco [CCO], has also posted impressive gains over last year, rising 65.18% to 7 January’s close. GLJ Research initiated coverage on Cameco in August, reports Yahoo Finance, and Johnson views owning shares of low-cost uranium producers like Cameco as the best way to invest in uranium.
Another ETF on the rise is the North Shore Global Uranium Mining ETF [URNM], which hit an all-time high at $104.00 on 9 November, and made headlines in October for surpassing $900m in total net assets. Tim Rotolo, CEO and founder of North Shore Indices, was understandably bullish after the fund had surpassed $500m only two months earlier, saying, "despite its recent rise, we believe we are still in the early stages of a long-term bull market in uranium prices", reports Yahoo Finance.
“despite its recent rise, we believe we are still in the early stages of a long-term bull market in uranium prices” - North Shore Indices CEO Tim Rotolo
Are there any fresh headwinds for uranium stocks?
The EC’s announcement wasn’t greeted warmly all round. The Guardian reported that some environmental activists were furious at the move, describing it as "greenwashing", and an attempt to "water down the good label for sustainability." And although the proposal is backed by France and others, the EC's proposed reclassification of uranium as a green energy source may yet stall. Austria's government threatened to sue the EC if it does ultimately label nuclear power as green. However, the publication estimates that opponents lack the votes needed to block the plan.
Nuclear as a concept also has its critics. New capacity is costly and time-consuming to build compared with solar, for example, in giving grids clean power. But Ciampaglia remains optimistic, calling out renewables’ reliability concerns: "Renewables, while they'll continue to get the lion's share of public support, financial support, government subsidisation ... the reality is, they're not as reliable as everybody had hoped they would be."
“Renewables, while they'll continue to get the lion's share of public support, financial support, government subsidisation ... the reality is, they're not as reliable as everybody had hoped they would be” - Sprott Asset Management CEO John Ciampaglia
What’s next for uranium stocks?
The Motley Fool’s Neha Chamaria sees clear positives for uranium investors looking at Cameco shares, arguing that “Cameco is one of the world's largest uranium miners, and its moves can have a strong bearing on the uranium industry, specifically on the supply side.” She adds that the company’s “operational flexibility, alongside strong financials, are huge competitive advantages”.
Cameco has a positive consensus Overweight rating with the Wall Street Journal, comprising six Buy, one Overweight and five Hold ratings. After its strong recent performance, analysts’ median price target is $28.81, 3.89% under Friday’s $29.93 closing level.
After Uranium Energy announced its intention to acquire Uranium One’s US operations in November, the company “has now positioned itself to … become one of the largest uranium mining companies in the US .... that's an attractive proposition to bet on if you're willing to stomach the risks that small-cap stocks bring along”, according to Chamaria.
Analysts’ consensus view appears to bear this out, with three out of three Buy ratings among analysts following the stock according to the WSJ, and a median price target of $6.40, representing a potential upside of 64.95%.
Whatever your stance on uranium stocks, it’s a sector that’s certainly firmly back in the conversation, and the latest political direction could mean recent gains are set to continue as we move further into 2022.
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