In This Article:
The spot price for uranium, the crucial element for producing nuclear power, has roughly doubled over the past five years. That growth was fueled by the world's renewed interest in nuclear power as a clean energy source, geopolitical conflicts driving more markets away from fossil fuels, and rapid expansion of the power-hungry artificial intelligence, cloud, and data center markets.
Bank of America expects uranium's spot price to nearly double from about $67 per pound today to $120 by the end of 2025, then rise to $135 in 2026 and $140 in 2027. At the end of 2024, the International Atomic Energy Agency (IAEA) predicted the world's nuclear capacity could increase 2.5 times from its current capacity by 2050 in a "high case scenario."
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
One of the most straightforward ways to profit from that nuclear supercycle is to invest in Cameco (NYSE: CCJ), one of the world's leading producers of uranium. The Canadian miner produced roughly 5% of the world's uranium in 2023, and it's the largest publicly traded uranium miner.
It operates mines and mills across Canada, the United States, and Kazakhstan. The company's stock price has already surged more than 330% over the past five years, but will it head even higher over the next 12 months?
What happened to Cameco over the past few years?
Cameco, like other miners, is tightly tethered to the cyclical price swings of its underlying commodity. Moreover, macro headwinds, tariffs, trade tensions, and geopolitical conflicts could disrupt its mining operations.
The spot price of uranium actually rose in 2020 and 2021, but the pandemic forced the company to suspend some of its mining operations. That's why its revenue declined in both years as it turned unprofitable on an adjusted basis.
| Cameco Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue growth | (3%) | (18%) | 27% | 39% | 21% |
| Gross margin | 5.9% | 12.5% | 0.1% | 21.7% | 25% |
Data source: Cameco.
But after that setback, the business recovered over the following three years as the pandemic passed, Its gross margins expanded, and it turned profitable (on an adjusted basis) again.
To reduce its long-term volatility and increase its exposure to the growing nuclear power market, Cameco partnered with the Canadian infrastructure investment company Brookfield Asset Management (NYSE: BAM) to acquire Westinghouse Electric -- a key designer, builder, and supplier of nuclear power plants -- in late 2023. Cameco now owns 49% of Westinghouse Electric, while Brookfield owns the remaining 51%.