Should You Buy Cameco Stock While It's Below $95?

Cameco (CCJ 0.69%), one of the world's top uranium miners, saw its stock surge more than 580% over the past five years. That rally was driven by a soaring demand for uranium in new nuclear projects in a post-pandemic market, as well as its partnership with Brookfield Asset Management to acquire Westinghouse Electric in late 2023. Uranium's rising spot price, which more than doubled over the past five years, and its new 49% stake in Westinghouse Electric, which designs and builds nuclear power plants, made it a well-balanced nuclear energy play.

Even though Cameco's stock is already trading near its record high of $66.91 as of this writing, it remains well below Wall Street's top price target of $95. So, should investors accumulate this hot stock before it hits that price target, which was set by CIBC on June 11?

Let's review its business model and upcoming catalysts to decide.

Image source: Getty Images.

Understanding Cameco's business

Cameco, which is based in Canada, operates mines and mills in Canada, the U.S., and Kazakhstan. It mined approximately 17% of the world's uranium in 2024, making it the second-largest uranium miner after Kazakhstan's National Atomic Kazatomprom. Its revenue growth and gross margins are tightly tethered to uranium's price, and its mining operations could be disrupted by macro headwinds, tariffs, geopolitical conflicts, and other unpredictable challenges. Its growth slowed down significantly in 2020 and 2021 -- even as uranium's spot price rose -- as it suspended its mining operations during the pandemic.

Data source: Cameco.

But over the past three years, Cameco's revenue grew by double-digit percentages again as its gross margins expanded. Its new stake in Westinghouse Electric also offset the volatility in its core mining business and made it the top uranium supplier for Westinghouse's nuclear power plants.

What are Cameco's catalysts?

For 2025, Cameco expects its partnership with Westinghouse to boost its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by about $170 million. That would be equivalent to 11% of Cameco's adjusted EBITDA of $1.55 billion in 2024.

Westinghouse's near-term growth will be driven by the construction of two new nuclear power plants in the Czech Republic and up to 10 new nuclear power contracts in the U.S. as part of the Trump administration's push to ramp up its production of domestic energy. The growing usage of small modular reactors (SMRs), which are easier to manufacture and deploy than traditional reactors, should complement that expansion.

Meanwhile, the ongoing ban on uranium exports from Russia, the supply chain constraints in Kazakhstan, and the coup in Niger (a key producer of uranium) in 2023 are all driving nuclear power companies to purchase more uranium from Cameco.

All of those challenges -- along with the soaring energy needs of the cloud, data center, and AI markets -- could drive uranium prices even higher over the next few years. Bank of America expects uranium's spot price to rise from about $70 today to $120 by the end of 2025, and reach $135 in 2026 and $140 in 2027. From 2024 to 2050, the International Atomic Energy Agency (IAEA) sees the world's nuclear capacity expanding by up to 2.5 times.

To meet that growing demand, Cameco will extend its Cigar Lake mine's life through 2036, and it's mulling an expansion of its McArthur River mine beyond its current capacity. It might also restart its Springfields conversion site in the U.K., which was halted back in 2014.

Over the next few years, Cameco's 49% stake in Global Laser Enrichment (GLE) -- its uranium enrichment joint venture with Silex -- could allow it to bundle uranium enrichment capabilities with its core mining and conversion businesses. That would turn it into a "one-stop shop" for purchasing enriched uranium.

But should you buy Cameco's stock right now?

From 2024 to 2027, analysts expect Cameco's revenue and adjusted EBITDA to grow at a CAGR of 7% and 15%, respectively. With an enterprise value of $37.9 billion, Cameco trades at 11 times this year's sales and 20 times its adjusted EBITDA. Those valuations still seem reasonable relative to its growth potential.

If it rallies another 44% to CIBC's new price target of $95, it will trade at 16 times and 29 times this year's revenue and adjusted EBITDA, respectively. It wouldn't be cheap, but its long-term tailwinds could justify that higher valuation. Therefore, I think Cameco is still a great stock to buy right now -- even as it trades near its all-time highs.