What happened

Uranium stocks have shot up in recent weeks, but one stock that's stood out is Uranium Energy (NYSEMKT:UEC). It rallied 22% in the month of October according to data provided by S&P Global Market Intelligence, and is already up just as much in November. With those gains, the small-cap uranium stock has jumped almost 83% since the start of September, as of this writing.

So what

Before I tell you why Uranium Energy stock is on fire, it's important to explain the company's operations.

Uranium Energy is primarily a uranium mining and exploration company with one uranium mine and a uranium processing facility in Texas that is licensed to process up to 1 million pounds of uranium compound per year. Uranium Energy also claims to own mineral rights in Wyoming, Arizona, New Mexico, Colorado, and Paraguay.

A space shuttle drawn on a blackboard.

Image source: Getty Images.

However, Uranium Energy hasn't generated any revenue since 2015, nor does it have any uranium supply or off-take agreements. Simply put, the company is not selling anything and had, in fact, accumulated net losses worth $289.8 million as of April 30.

Why, then, is the market pumping Uranium Energy shares higher, you may ask?

Here's the thing: Uranium Energy is now buying uranium in the spot market in hopes of selling it later at higher prices to make some money. With uranium prices rebounding in October, investors are, therefore, simply buying into the company's expectations of making some money off higher yellowcake prices.

On Oct. 28, Uranium Energy reported having received deliveries of 1.2 million pounds of uranium of the 4.1 million pounds of uranium it had contracted at an average cost of $32 per pound to be delivered through December 2025.

Uranium prices were unstoppable until the end of September when they crashed, lost nearly one-third in value in a matter of days, and dropped to around $34 per pound by Oct. 8. Prices bounced back thereafter to $49 per pound by Oct. 25, driven by multiple industry developments, specifically the launch of a physical uranium fund in Kazakhstan by Kazatomprom, the world's largest uranium miner.

As uranium prices soared, so did Uranium Energy stock.

UEC Chart

UEC data by YCharts

In a twist, uranium prices have fallen back in November, but shares of Uranium Energy haven't.

Now what

On Nov. 3, Bloomberg reported China as planning to build nearly 150 new nuclear reactors over the next 15 years. That's massive, considering that only around 50 reactors are currently under construction and roughly 440 reactors are in use worldwide. As nuclear reactors primarily run on uranium fuel, the news reignited investor interest in uranium stocks. And with Bank of America also expecting uranium prices to shoot up to $60 per pound by the first quarter of 2022, bulls in Uranium Energy found yet another reason to bid the stock higher.

Here's something you'd want to keep in mind though: Uranium Energy hasn't revealed when or how it plans to sell any uranium, and its last reported uranium inventory is worth around $54 million at current uranium price of $45 a pound. Yet the stock is already commanding a market capitalization of nearly $1.2 billion, suggesting the road ahead could be a bumpy one for Uranium Energy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. 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.