Why NexGen Energy Stock Surged as Much as 14% Yesterday

Is the NexGen Energy (TSX:NXE)(NYSE:NXE) stock rally sustainable? Here’s what you need to know.

Kay Ng

Author Bio

Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt.

Education

Bachelor of Science (BSc) in Computer Science, University of British Columbia Further studies in financial markets, finance, and financial accounting

Areas of Expertise

Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies.

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Favorite Investment Quotes

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published January 6, 2022 8:40 am EST

Founded in 2011, NexGen Energy (TSX: NXE)(NYSE: NXE) is a British Columbia-based company led by experienced uranium industry professionals with a successful track record in discovering uranium deposits and in developing projects through discovery to production. At $6.21 per share at writing, a market cap of $3 billion is almost within reach for the energy stock.

oil and gas pipeline — Image source: Getty Images

What happened?

NexGen Energy stock surged as much as 14% yesterday but ended the day with only a 5% climb. As discussed in a Bloomberg article, there were protests in Kazakhstan, the world’s number one uranium producer. The event could usher uranium prices higher, which is why the energy stock rallied.

However, let’s also note that most of the rally in NexGen Energy stock dissipated swiftly. Perhaps, it’s because NexGen hasn’t exactly generated any revenues yet. Unfortunately, this makes the energy stock a top candidate for quick intraday pump and dump by traders when the opportunity arises.

So what?

Notably, NexGen does sit on the largest development-stage uranium deposit in the world — what it calls the Rook I project. The WNA Fuel Report in 2019 described there was a bear market of more than 10 years, resulting in underinvestment in the uranium production space. The World Nuclear Fuel Report followed in September 2021 that there will be a supply deficit beginning in 2027 that will widen through 2040. This should work in NexGen’s favour in the long run.

Let’s not forget that uranium is a source of clean energy. Some pundits believe that other clean energy sources such as renewable energy won’t be enough to replace fossil fuels in time. Therefore, to make the net-zero carbon deadline, many countries will need to utilize nuclear power.

Now what?

Since June 2021, NexGen Energy stock’s 12-month consensus analyst price target has appreciated 44% to $9.24. What’s relevant is that analysts believe the stock is becoming more valuable over time. This price target suggests near-term upside potential of almost 49%. Notably, the energy stock is also a multi-bagger candidate for long-term investors.