Cameco: Why There's Lots Of 2022 Upside Potential For This Uranium Miner's Stock

This article was written exclusively for Investing.com

• Substantial rise in CCJ in 2021
• Uranium prices are rising for three reasons
• CCJ’s trend is your friend, and it is higher
• Targets for CCJ in 2022 and beyond
• Analysts are bullish on one of the world’s leading uranium producers

Uranium is a silvery-grey metal in the actinide series of the periodic table. Its primary use is for fuel in nuclear power plants, making the metal an energy commodity. One kilogram of uranium can produce as much energy as 1,500 tons of coal.

Uranium also has military nuclear weapons applications and other industrial and medical applications. Though uranium is considered a commodity, it doesn't trade as actively as other energy products and metals.

While crude oil, natural gas and coal, as well as such base metals as copper have active futures markets where producers, consumers, and speculators establish prices, uranium trades primarily by appointment. In 2021, the commodity bull market took uranium prices along for the ride.

At the end of 2020, uranium’s price was around the $30.70 per pound level. On Dec. 31, 2021, it was trading $13 higher at the $43.70 level, an over 42% gain during 2021.

Cameco Corporation (NYSE:CCJ), headquartered in Saskatoon, is a Canadian uranium producer that sells the commodity to nuclear facilities in the Americas, Europe, and Asia. Canada is the second-leading uranium-producing country, behind Kazakhstan and ahead of Australia.

Substantial rise in CCJ in 2021

Kazakhstan’s Kazatomprom (KZ:KZAP) is the world’s leading uranium supplier, with an output of 13,291 tons in 2019 and 10,736 tons in 2020.

Orano, the French producer, mined 5,809 tons in 2019 and 4,453 tons in 2020. Cameco came in third during 2019 with 4,754 tons of production. In 2020, CCJ produced 3,021 tons.

Source: Kitco

The chart shows that Cameco is a significant worldwide presence. Falling output in 2020 was the result of mining stoppages because of the global pandemic.

Meanwhile, CCJ shares have moved substantially higher after reaching lows during early 2020.

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Source: Barchart

The chart highlights the bullish trend in CCJ shares which rose from $5.30 on Mar. 18, 2020, to a high of $28.49 on Nov. 8, 2021, a 437.5% gain.

At $21.81 on Dec. 31, 2021, CCJ was 311.5% above the March 2020 low and 62.8% higher than the closing level at $13.40 on Dec. 31, 2020. With just one day of trading so far in 2022, it closed on Monday at $22.71, up 4.13% for the day.

Uranium prices are rising for three reasons

Uranium’s price moved higher in 2021. Uranium closed at the $30.70 per pound level on Dec. 31, 2020.

Source: Trading Economics

The chart shows at $43.65 at the end of 2021, uranium gained 42.2% for the year.

At least three factors pushed uranium’s price higher in 2021:

1. Rising inflation boosted all commodity prices in 2021.
2. The demand for alternative and renewable energy sources is bullish for nuclear energy for the coming years.
3. Traditional energy prices moved significantly higher in 2021, with crude oil gaining over 50%, natural gas moving nearly 47% higher, and thermal coal for delivery in Rotterdam gaining over 70%.

Uranium is considered both a metal and energy commodity. Meanwhile, a composite of the six base metals on the London Metals Exchange moved over 38% higher in 2021.

CCJ’s trend is your friend, and it's higher

Shares of commodity producers tend to provide leverage compared to the minerals, metals, and other commodities they extract from the earth’s crust. They often outperform the raw materials price action during bull markets and underperform when prices head lower.

In 2021, uranium gained 42.2%, while CCJ shares moved 62.8% higher.

The trend in uranium and CCJ was higher, and the end of 2021 and the path of least resistance of prices reflect the market’s sentiment that higher prices are on the horizon for 2022.

Targets for Cameco stock in 2022 and beyond

As we head into 2022, Cameco shares have lots of upside potential based on past price action and rising global uranium demand.

Source: Barchart

The chart shows CCJ shares rose above the first technical resistance level at the March 2014, $25.84 high in 2021 when they reached $28.49 in November. The next target stands at the 2011, $44.81 high.

Above that, the all-time high from 2007 was at $56.00 per share.

Analysts are bullish on one of the world’s leading uranium producers

CCJ shares settled at the $21.81 level on Dec. 31, 2021. A survey of eight analysts on Investing.com has an average 12-month price target of $31.84, a 40.20% upside for the stock, with forecasts ranging from $23.18 to $39.71. Among the analysts polled, the majority gave the stock an 'outperform' rating. Uranium stocks have been hot in 2021, attracting lots of speculative interest.

With uranium's status as an energy commodity, and CCJ's position as one of the world’s leading producers there's a lot to recommend the stock. As countries address climate change, expect uranium demand to rise in 2022 since nuclear power is a cleaner alternative to hydrocarbons.

Written By: Andy Hecht