There are few companies that have done quite as well as Cameco (TSX: CCO) in the last year. And even fewer who have seen such sustained growth. And yet here we are, with Cameco stock seeing incredible gains of 63% in the last year alone.
That would mean if you had purchased $10,000 in Cameco stock one year ago, your shares would be worth $16,470 as of writing! Yet shares have come down slightly from 52-week highs. At those levels, you could have cashed out at $20,347.
The big question is whether this can continue to go on? Will Cameco stock continue at this clip, or are investors going to become impatient and take out returns? Today, let’s look at the strengths and potential pitfalls investors in Cameco stock may expect.
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Rising uranium
When it comes to Cameco stock, the biggest advantage it has is the uranium market. Spot uranium prices continue to be on the rise, currently at around US$90 per pound. That’s welcome news for Cameco stock, which continues to be the leading supplier of uranium, as higher prices mean high revenue.
And that’s exactly what we’ve seen. Cameco stock’s recent results have been quite positive, with the fourth quarter showing a significant increase in revenue, gross profit, and adjusted earnings per share, as well as operating cash flow.
But if you’re worried about this slowing down, that’s not likely to happen any time soon. There continues to be growing recognition that nuclear power will play a large role in the clean energy transition. The International Atomic Energy Agency calculated there are currently 438 reactors operating globally, but 58 more under construction. Even more will likely continue to be built, leading to further opportunities for Cameco stock.
The downside
Of course the problem here might be obvious, and that’s the reliance on uranium prices. We’ve seen this in other areas as well. The price of one product might soar at first, and then fluctuate over time, leading to lower revenue for the company.
This could certainly happen with Cameco stock, as uranium prices might rise now, but are historically volatile. The price can depend on geopolitical events, new mine discoveries, and even weather. This could lead to a sudden price drop in the past. Historically, this has occurred from reactor meltdowns.
Furthermore, Cameco stock isn’t without competition, especially as there continues to be more mines found in Russia and Kazakhstan. While there are Russian sanctions now, that may not be the case forever, leading to lower uranium prices.
Finally, the long-term outlook for nuclear power is uncertain. Despite is resurgence, public perception, safety concerns and competition from other renewables are still on the table. So the growth in nuclear power and uranium may not be a long-term option.
Bottom line
If you’re interested in Cameco stock, it’s certainly a safe bet I’d say for the next year, barring major events. In that time, you could certainly continue to see its share price rise even further. But as for a long-term hold, that will be something you’ll need to check in on regularly with this stock.
