Pointing to “peak uranium” valuation and investor positioning, Eight Capital analyst Ralph Profiti expects Cameco Corp. to continue to trade at the high-end of historical ranges after better-than-anticipated third-quarter results.
“We believe that Cameco remains well-positioned for improved financial performance driven by our forecasts of rising uranium prices, exposure to market-related contract terms (albeit limited), improved cost structure as Cigar Lake and McArthur River reach licensed production rates, and the benefits of vertical integration in the Uranium and Fuel Services businesses through the pending acquisition of a 49-per-cent stake in the Westinghouse Electric JV.” he said. “Increased interest from traditional resource investors, energy investors, clean energy investors, infrastructure investors and generalists, reinforces our view of peak-uranium P/NAV multiples of 1.6-1.8 times for Cameco reflective of uranium ‘bull markets.’”
Shares of the Saskatoon-based company surged 8.4 per cent on Tuesday, exceeding a 52-week high, after reporting quarterly earnings per share of 32 cents, topping both Mr. Profiti’s 10-cent estimate and the consensus forecast of 13 cents. The beat was driven by gains from foreign exchange and lower unit operation costs.
“Cameco is starting to see the benefits of a transitioning cost structure towards a greater reliance on contract book sales from producing mines (Q3/23: 3.0 million produced at $32.37 per pound) vs. purchased uranium (Q3/23: 0.8 million pounds purchased at $79.14/lb),” he said. “FY23 guidance updates are largely as expected with consolidated revenue guidance up 2.0 per cent to $2.43-2.58-billion (from $2.38-2.53-billion) driven by a 2.7-per-cent increase in average realized price guidance to $65.50/lb (from $63.80/lb), partly offset by higher unit operating cost guidance up 5.0 per cent to $52.50/lb (from $50/lb).”
Maintaining a “buy” rating for Cameco shares, Mr. Profiti raised his target to $65, above the $63.85 average, from $60.