Is Cameco Stock a Buy Now?

The uranium market is heating up, and Cameco Corporation (CCJ) is at the center of it all. With a 21.18% increase in revenue to $3.14 billion in 2024, the company is riding a wave of surging uranium prices and growing demand for nuclear energy. But is Cameco stock a buy now, or is it a risky bet on a volatile market? Let's dive in.



The Bull Case for Cameco

Cameco's bullish narrative is built on several key factors:

1. Growing Demand for Uranium: The world is increasingly turning to nuclear power as a clean and reliable energy source. With more than 120 companies endorsing the Net Zero Nuclear Industry Pledge, the demand for uranium is expected to remain strong. Cameco, as one of the world's largest uranium producers, is well-positioned to capitalize on this trend.

2. Strong Financial Performance: Despite a 52.38% drop in earnings to $171.85 million, Cameco's revenue growth is impressive. The company delivered 33.6 million pounds of uranium at an average realized price of $79.70 per pound, a significant increase from the previous year.

3. Analyst Optimism: Five analysts have given Cameco an average rating of "Strong Buy," with a 12-month stock price forecast of $73.64, representing a 94.66% upside from the latest price.

4. Long-Term Contracting: Cameco's strategy of long-term contracting and disciplined marketing activity is expected to generate full-cycle value and support its financial stability.

The Bear Case for Cameco

However, there are several reasons to be cautious about investing in Cameco:

1. Earnings Volatility: Cameco's earnings can vary significantly from quarter to quarter, making it a risky bet for investors seeking stability. The company's earnings plunged 94% year over year to just $0.02 per share in Q3 2024, despite strong revenue growth.

2. Westinghouse Challenges: The Westinghouse segment, which Cameco acquired, reported a full-year net loss of $218 million due to the impact of purchase accounting and other non-operating acquisition-related transition costs. This segment's performance could continue to weigh on Cameco's earnings.

3. Market Volatility: Uranium prices are notoriously volatile, and a drop in prices could significantly impact Cameco's financial performance. The company's stock price has already declined due to concerns over China's less energy-intensive AI and broader market selloffs.

4. Valuation Concerns: At a current-year P/E ratio of well over 200, Cameco stock seems overpriced. Even taking future earnings growth as a given, analysts only forecast earnings to grow about 40% or so annually from now through 2030. This simply doesn't justify a 200x current P/E ratio.

The Verdict

Cameco's stock is a high-risk, high-reward play on the growing demand for nuclear energy. The company's strong revenue growth and strategic focus on long-term contracting make it an attractive investment for those willing to stomach the volatility. However, the significant drop in earnings, challenges in the Westinghouse segment, and overvaluation concerns make it a risky bet for more risk-averse investors.



In conclusion, while Cameco's long-term prospects are promising, the current market conditions and earnings volatility make it a risky investment. Investors should carefully consider their risk tolerance and investment horizon before buying Cameco stock.