Shares of rare earths and uranium miner and processor Energy Fuels (UUUU +1.20%) rallied 12.7% this week as of 11:34 a.m. ET Friday, according to data from S&P Global Market Intelligence.
There wasn't much in the way of company-specific news this week, but several news items regarding the Trump administration's focus on nuclear energy, as well as strategic investments in miners of critical materials, boosted shares of Energy Fuels and its peers.
NYSEMKT: UUUU
Key Data Points
Government support goes a long way in this market
This week, the Trump administration made several positive comments and indications regarding both nuclear energy, which is Energy Fuels' core business, and other strategic minerals.
On Wednesday, Energy Secretary Chris Wright gave a speech at the New York Press Center during a meeting of the United Nations, in which he reemphasized a focus on boosting nuclear energy. In the speech, Wright advocated for "common sense, grow more energy, focus on nuclear power, focus on natural gas -- by far the two biggest potential needle movers on greenhouse gas emissions."
Energy Fuels is the leading U.S.-based producer of uranium oxide, which is the first step in producing baseload nuclear energy. Therefore, it was no surprise to see Energy Fuels rallying on the heels of Wright's speech.
In addition, it was also reported the Trump administration is in talks to take a minority stake in lithium miner Lithium America (LAC 0.12%). The administration has already taken equity stakes in certain mining companies in return for price floors and/or demand mandates from U.S.-based customers, with these strategic investees typically seeing their stocks soaring in response to these deals.
Then on Thursday, The Information reported that the U.S. government was also looking to take more equity stakes in other U.S.-based mining companies that mine critical materials. That sent shares of such companies, including Energy Fuels, skyward on Thursday, adding to this week's gains.
Image source: Getty Images.
Energy Fuels' valuation looks frothy, but it's hard to bet against
Energy Fuels has had a tremendous 229% gain this year, and it seems like the stock may in a speculative bubble. Shares trade at 16 times next year's revenue estimates and 140 times 2026 adjusted non-GAAP (generally accepted accounting principles) earnings per share estimates.
While that valuation seems bubble-like, Energy Fuels' revenue and profit trajectory is coming off of zero, so it's hard to estimate where "mature" revenues and profits will ultimately end up. Moreover, Energy Fuels has a unique asset in its White Mesa mill, which is the only U.S. refiner with the capability of refining certain rare earth elements.
So Energy Fuels owns a geopolitically scarce asset, and its market cap is only $3.9 billion today, even after this year's gains. Therefore, while the stock seems expensive on near-term financials, there's also potential for more upside. Short-sellers, at least, should stay away.
