Is it Too Late to Buy Cameco Stock?

Cameco (TSX:CCO) stock may be up 72% in the last year, but the outlook is bright for this top energy producer.

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When it comes to growth stocks, Cameco (TSX:CCO) stands out as one of the top winners of this last year. Shares of Cameco stock are up 72% in the last year after all. Yet, with shares now down by 12% since 52-week highs, is it now time to buy up on the dip?

A growing sector

Cameco is a leading player in the uranium industry, which positions it well to benefit from the increasing global focus on clean energy. As countries worldwide strive to reduce carbon emissions and transition to sustainable energy sources, nuclear power is gaining recognition as a viable solution due to its low carbon footprint. Cameco stock, as one of the largest uranium producers, stands to benefit significantly from this shift.

Additionally, Cameco has a strong financial position and robust production capabilities. The company has strategically managed its operations to maintain a low-cost production profile, ensuring profitability even during periods of low uranium prices. This financial prudence enhances its resilience and positions it favourably for future growth as uranium demand increases.

Furthermore, the long-term outlook for uranium demand is promising. With the global push for clean energy, many countries are expanding their nuclear power capacity. This increased demand for uranium is expected to drive prices higher, benefiting Cameco and its shareholders. The company’s extensive portfolio of high-quality assets and strategic partnerships also provide a solid foundation for future growth.

Earnings improvements

Recent updates from Cameco indicate several significant developments that investors should be aware of. In the first quarter of 2024, Cameco reported strong financial and operational performance despite some geopolitical and supply chain challenges. The company had a net loss of $7 million but recorded adjusted net earnings of $56 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $345 million. The increase in earnings was driven by a 27% rise in the average realized price of uranium in Canadian dollars and strong production performance in the uranium segment.

Cameco also completed a $500 million private placement of 4.94% Senior Unsecured Debentures, Series I, which will mature in 2031. This move strengthens Cameco’s financial position, providing additional liquidity to support its operations and strategic initiatives.

Furthermore, Cameco’s production in the uranium segment increased to 5.8 million pounds in the first quarter of 2024, compared to 4.5 million pounds in the same period of 2023. The unit cash cost of production decreased by 16%, demonstrating improved operational efficiency. The company expects to continue its strong production performance, with 18 million pounds of production planned for the McArthur River/Key Lake and Cigar Lake operations for the year.

More to come

In terms of market outlook, Cameco is positioned to benefit from the growing demand for nuclear energy as countries seek to reduce carbon emissions. This is supported through Cameco’s recent involvement with Westinghouse. This is a significant strategic move aimed at strengthening its position in the nuclear fuel market. Cameco, alongside Brookfield Renewable Partners, completed the acquisition of Westinghouse Electric Company in early 2023. This acquisition allows Cameco to expand its footprint across the nuclear fuel cycle, enhancing its capability to provide a comprehensive range of services and products to the nuclear energy sector.

Now, the future looks bright. Cameco stock is projecting consolidated revenue between $2.9 billion and $3.0 billion for 2024. The company also anticipates strong cash flow generation, bolstered by increased production and favourable pricing in the uranium market. Cameco’s first-quarter results demonstrated robust performance in its uranium segment, with significant increases in net earnings and adjusted EBITDA compared to the previous year.

Furthermore, the company continues to execute its production plans well, with an expected 18 million pounds of uranium production from its McArthur River/Key Lake and Cigar Lake operations in 2024. This production level is aligned with its contract portfolio and customer needs, ensuring stable and reliable supply to meet growing market demand.

Bottom line

Overall, Cameco stock’s outlook is supported by its strong financial performance, strategic acquisitions, robust production targets, and favourable market dynamics. The company’s strategic positioning and disciplined approach to contracting and operations are expected to drive continued growth and value for investors. And that certainly makes it worth considering even at these highs.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners and Cameco. The Motley Fool has a disclosure policy.

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