Shares of Canadian uranium mining company Cameco Corporation (CCJ +2.09%) gained 2.3% through 11:05 a.m. ET Monday after Swiss bank UBS initiated coverage of the nuclear stock. But here's the thing:
UBS didn't tell investors to buy Cameco stock. In fact, it rates Cameco stock as only "neutral."
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What UBS says about Cameco
UBS gave us a bit of a mixed message on Cameco, though. On the one hand, a neutral rating doesn't seem to be much of an encouragement to buy Cameco shares. On the other hand, though, UBS puts a CA$140 price target on Cameco stock, equivalent to $100.80 US.
Yet Cameco stock only costs $94 and change today, and the higher price target actually does imply Cameco stock might be worth buying.
NYSE: CCJ
Key Data Points
Is Cameco stock a buy?
So which is it, UBS? Is Cameco stock undervalued or not? Well, it's complicated.
On the one hand, UBS says Cameco "offers strong exposure to the attractive long-term uranium market," as TheFly.com tells us today. Spot uranium prices are above $77 per pound right now, up about 10% from six months ago, and UBS thinks this will help Cameco charge higher prices on long term supply contracts going forward.
On the other hand, though, Cameco's stock price is up 84% over the same six months! So even if UBS is right about Cameco's profits probably increasing, much if not all of the improved earnings this implies have already been priced into the stock.
With Cameco shares now fetching a nosebleed 96-times-earnings valuation, I simply don't see a lot of value in Cameco stock today -- and I cannot call it a buy at this price.
