Please ensure Javascript is enabled for purposes of website accessibility

Why Uranium Energy Corp Stock Shot Higher by as Much as 35% Today

By Reuben Gregg Brewer - Mar 16, 2021 at 3:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The U.S. uranium miner provided a business update, and investors seemed to really like what they read.

What happened

Shares of Uranium Energy Corp (UEC 8.43%) rose a dramatic 35% in the first ninety minutes or so of trading. That massive price gain didn't last, however, with the stock quickly giving up more than half of the advance over the next ninety minutes or so before turning higher again. At 1 p.m. EDT the shares of the U.S. uranium miner had rebounded back to a roughly 20% gain -- not as big as the early price jump but still quite impressive. The likely reason for the price gyrations was a company update.

So what

Uranium Energy released a news report explaining that it had filed an earnings report with the Securities and Exchange Commission (SEC) for the fiscal quarter ended Jan. 31. But the bigger news was the update of its balance sheet and the business plans that it discussed in the update. As of March 15, the company had cash on hand of $65.8 million thanks partially to a stock sale. The company also reduced the outstanding balance on its credit facility by roughly 45%. Uranium Energy believes this reduction positions the company to serve the U.S. utility industry as it looks to increase domestic uranium supplies and foster the creation of a reserve of the fuel.   

An image of an atom in cupped hands.

Image source: Getty Images.

But that was only half the news. Strategically, and thanks to its cash hoard, Uranium Energy is also building up a uranium reserve of its own by acquiring uranium on the open market. It already has a deal to buy 400,000 pounds of material for $10.9 million. It believes the cost to buy the nuclear fuel is lower than the cost of production across most of the industry. That allows Uranium Energy to leave its resources in the ground for a time when prices are higher.

Specifically noted was the expectation that U.S.-mined uranium might end up trading at premium prices because of the efforts, noted above, to create a domestic reserve. Investors appear to have been pleased with the financial update and game plan here, pushing the shares higher.  

Now what

Uranium Energy is a rather small company, with a market cap of roughly $600 million. Competitor, and industry bellwether, Cameco Corp, for reference, is a $6.5 billion company. Since April of 2020, uranium stocks have roared higher, with Cameco up an impressive 150% and Uranium Energy an incredible 460%. That's not meant to discount the positives here but to put them into perspective. A lot of good news has been priced into uranium stocks like Uranium Energy, especially when you consider that the company is buying uranium on the open market at below what it costs to mine the material. At the very least, conservative investors might want to tread with caution. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Uranium Energy Corp. Stock Quote
Uranium Energy Corp.
$3.73 (8.43%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.