Nuclear energy is experiencing a resurgence, and Cameco (CCJ 1.96%) is well positioned for the renewed interest. Since the beginning of the year, the stock has surged by 46%, fueled by a wave of investor optimism surrounding the future of nuclear power.
As nations seek to secure their energy needs, the role of nuclear power is becoming increasingly pivotal. Not only is nuclear a reliable source of energy, but it stands out as a cleaner-burning fuel that can meet the growing demands of our artificial intelligence (AI)-driven data centers.
If you're considering jumping on the Cameco train, let's dive into the stock and the investment opportunity it presents.
The sentiment around nuclear power has shifted dramatically
In the years following the Fukushima meltdown, numerous countries had decommissioned and stopped the planning and construction of nuclear facilities. However, the tides have turned, and nuclear energy is coming back into favor.
Across the world, 31 countries have pledged to triple their nuclear power capacity by 2050. Rising geopolitical tensions in recent years, such as Russia's invasion of Ukraine, have led many countries to seek energy sources that are less volatile and more secure.
Countries seek energy security, which they are achieving with one of the most efficient power sources available. While there are risks to nuclear power, as evidenced throughout history, at the end of the day, it is a low-carbon, clean source of energy that might be our best bet to meet the growing power demands over the next decade.
Image source: Getty Images.
The momentum is real. Numerous new build construction projects are underway or planned across the world, with China leading the way in new builds. Meanwhile, several reactors are being saved from early retirement, and life extensions to existing reactors are being sought and approved, pushing some reactor lives to 80 years in the U.S.
On top of that, U.S. President Donald Trump signed executive orders to quadruple nuclear energy capacity to 400 GWe by 2050, and hopes to have 10 large-scale nuclear reactors under construction by 2030. Then there is the emergence of small modular reactors (SMR) technology. This technology is in its very early stages, and there is increasing interest in SMRs for various applications, including industrial, remote mining, off-grid communities, and defense facilities.
Technology companies have jumped in headfirst. All the major hyperscalers, including Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle, are expanding power purchase agreements with nuclear providers or making investments in SMRs to secure their own growing energy needs.
Cameco's role in the nuclear value chain
Cameco is a key player and one of the largest uranium producers globally. It has a majority stake in the world's largest, high-grade uranium mine at McArthur River (70% ownership stake). It also has an 83% stake in the Key Lake uranium mill, a facility that processes uranium ore to extract and concentrate uranium.
Cameco's estimated reserves from these assets are 251 million pounds of uranium, with an estimated mine life until 2044.
Cigar Lake in Saskatchewan, Canada, is another high-grade uranium mine where Cameco has a 55% ownership stake. Cameco's share of estimated uranium reserves here is 105.2 million pounds, with an estimated mine life until 2036. It also holds a 40% interest in joint venture Inkai in Kazakhstan, where its estimated share of reserves is 100.4 million pounds, with an estimated mine life until 2045.
Finally, the company owns a 49% interest in Westinghouse Electric as part of a strategic partnership with Brookfield Renewable Partners. Westinghouse is a nuclear reactor technology original equipment manufacturer (OEM) and a global provider of products and services to commercial utilities and government agencies.
Westinghouse provides outage and maintenance services, engineering support, instrumentation and controls equipment, plant modifications, components and parts, and designs and manufactures nuclear fuel supplies for light water reactors. It is also the only fully European supplier for certified VVER fuel assemblies, which offer significant improvements in safety, efficiency, and operational stability over older reactor designs.
Is Cameco a buy?
Cameco layers in long-term contracts that protect against weaker market conditions while providing exposure to price improvements. As of June 30, Cameco has commitments to deliver an average of about 28 million pounds per year from 2025 through 2029.
Investors have grown quite optimistic around Cameco, and the stock has gotten relatively expensive, at 58.5 times this year's projected earnings per share (EPS) of $1.28. That said, this year's earnings growth would be up 389% on a generally accepted accounting principles (GAAP) basis. Analysts also projected earnings will grow by 25.9% in 2026 and another 17.5% in 2027 as Cameco enjoys the tailwinds from robust uranium demand.
At this valuation, investors may want to wait for Cameco's valuation to come down a little. That said, demand for nuclear energy will only increase. With strong initiatives supported by several countries and financial institutions, uranium miners are set for a significant boost to their business over the next several years, and Cameco is well-positioned to capitalize on this growth.
