Is This Your Last Chance to Buy Cameco Corp. Under $12?

With one analyst projecting Cameco Corp. (TSX:CCO)(NYSE:CCJ) stock will hit $21, is now the time to buy?

| More on:

Youโ€™re reading a free article with opinions that may differ from The Motley Foolโ€™s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After a dismal run through most part of 2017, shares of uranium giant Cameco Corp. (TSX:CCO)(NYSE:CCJ) bounced off lows in November and rallied close to $13.5 before losing some ground again. Yet, the stock is still up 5% since November, indicating that the worst might be over โ€” a sentiment thatโ€™s echoing through several analyst firms.

Just days ago, TD Securities raised its rating on Cameco stock to buy from hold and upped its price target to $21 from $14.5, backed by anticipation of a recovery in uranium prices. Could that mean this is your only chance to buy Cameco while itโ€™s still trading cheap under $12?

Why Cameco shares surged after November

Low uranium prices proved to be the biggest hurdle for uranium producers in 2017. Cameco struggled to grow its bottom line โ€” its revenue still grew thanks to deliveries under long-term contracts โ€” when Japan-based Tokyo Electric Power dealt a huge blow to the company by abruptly terminating a uranium supply contract that was to run from 2017 to 2028.

With a major contract now gone and other contracts nearing expiry, Cameco had to pull up its socks and decide its course of action to survive. The company did just that in November, when it temporarily suspended operations at its largest mine, McArthur River/Key Lake in Saskatchewan, and announced a massive 80% dividend cut to prevent further cash burn.

Despite the dividend shock, investors cheered Camecoโ€™s move, hoping that a production cut would ease the supply glut and provide tumbling uranium prices a floor. Soon after, in December, Kazakhstan โ€” the worldโ€™s largest uranium supplier โ€” announced its intentions to cut production by 20% over the next three years. It was just what the uranium industry wanted to hear.

Whatโ€™s next?

TD Securities analyst Greg Barnes believes that supply cuts from the industryโ€™s top suppliers could mean the bottoming of spot uranium prices. Spot uranium prices are, in fact, already started showing some signs of life, gaining nearly 10% between October and December.

More importantly, Barnes believes that the production cuts could encourage nuclear utilities to sign contracts. Investors in uranium may know that the bulk of the uranium produced is supplied to utilities under long-term contracts that can range from anything between three years to 15 years. The contract market has been dry so far, as most utilities have waited for lower uranium prices. Once prices recover, utilities should be back in the game.

Should you buy Cameco now?

Much like TD Securities, I believe the worst is over for the uranium markets. However, the recovery could be painfully slow, and investors in Cameco shouldnโ€™t expect any substantial improvement to its top or bottom lines in the near future.

Cameco is, however, striving hard to cut costs, preserve cash, and maintain its dividend at a sustainable level. If things worsen, Cameco will have enough cash flow to sail through. If things improve, Camecoโ€™s cost control should provide further impetus to growth. Long-term investors can enter Cameco now and enjoy its 3.5% dividend yield while awaiting a recovery. But if you want more from a stock than just bank on its yield, Iโ€™d advise you look at other stocks with better visibility into the future instead.

Should you invest $1,000 in Cameco right now?

Before you buy stock in Cameco, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy nowโ€ฆ and Cameco wasnโ€™t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the โ€œeBay of Latin Americaโ€ at the time of our recommendation, youโ€™d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month โ€“ one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

This article represents the opinion of the writer, who may disagree with the โ€œofficialโ€ recommendation position of a Motley Fool premium service or advisor. Weโ€™re Motley! Questioning an investing thesis โ€” even one of our own โ€” helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Neha Chamaria has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? Youโ€™re not alone. At The Motley Fool Canada, we get it โ€” and weโ€™re here to help. Weโ€™ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Metals and Mining Stocks

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Best Stock to Buy Right Now: Barrick Gold vs Agnico Eagle?

Agnico-Eagle Mines stock continues to soar off of strong results while Barrick Gold grapples with political troubles in its Africanโ€ฆ

Read more ยป

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Stocks for Beginners

What to Know About 2 Canadian Mining Stocks for 2025

Mining stocks can be a strong investment, or a bit of a wild ride. So where do these two topโ€ฆ

Read more ยป

nugget gold
Metals and Mining Stocks

2 Gold Stocks to Consider in the Wake of Trump Tariffs

Investing in gold mining stocks such as Kinross can help you diversify your portfolio and lower overall risk.

Read more ยป

Metals and Mining Stocks

Value Hunters: Itโ€™s Time to Snap Up These TSX Gems

Investing in undervalued gems such as MAG Silver should help you beat the broader markets in 2024 and beyond.

Read more ยป

A plant grows from coins.
Stocks for Beginners

3 Top Basic Materials Sector Stocks for Canadian Investors in 2025

These three Canadian stocks certainly have a strong future ahead, and now might be time to buy the dip.

Read more ยป

todder holds a gold bar
Stocks for Beginners

Outlook for Barrick Gold Stock in 2025

Gold stock Barrick may have proven itself in the past, but with geopolitical issues on hand, should investors move elsewhere?

Read more ยป

nugget gold
Metals and Mining Stocks

Gold Stocks in 2025: Why Royalty Stocks May Outshine Miners

When gold prices surge, mining stocks are typically the better picks. But when there is uncertainty about the metal, royaltyโ€ฆ

Read more ยป

People walk into a dark underground mine.
Metals and Mining Stocks

Better Mining Stock: First Quantum vs Teck Resources?

These two mining stocks offer huge returns and income for investors. But one does seem a bit riskier than theโ€ฆ

Read more ยป