Target: $18Its amazing to me this has not gapped down to 2008, or even 2004 levels of $10. Cameco is not a cheap stock even at these levels.
a
They have 476 MM lbs U3O8 total in ground. Even at $100/lb that is only $47B gross. Their market cap is $11 B. But that doesnt include the cost to produce, taxes, the fact that most of that won't come out of the ground for years, and the fact that they have stupidly entered into long term contracts which means they never get a price based on true scarcity. assuming that U actually becomes scarce some day. Current op margin is only 25%. This is not even worth $11B today even if they could extract all their reserves this year and sell them at current terms. Conclusion: investors are betting everything on much much higher U prices in future years.
b
Their salse price is in US$, but their expenses are almost all C$. The C$ is now about 10% higher than their average of C$1.05/USD in 2010. Their margins were only 25% in 2010. So right there, 2011 margins could be expected to be down to 17% or so in 2011. This means 2010 earnings were really only about 89c/shr at current x-rates, not the 130c/shr reported. This doesn't factor inflation.
c
Most importantly, the nuclear power industry can thank Tepco for highlighting the free call option that society has given nuclear power plants covering them for potential disasters. This was not priced in. Nobody is even talking about potential intentional man-made disasters, beyond obvious incompetence or reactor design.
Nuclear sentiment is just not going to recover quickly unfortunately, as I now have confidence that the Tepco disaster will continually remind, even if there is a case that this disaster is really proof of the safety of Nuclear.
The big winners are coal and natural gas. Better to buy U.TO to bet on a rebound.