Cameco (TSX:CCO) Stock: Why This Canadian Stock Is Surging

Cameco (TSX:CCO)(NYSE:CCJ) stock has more than doubled in the last year, but why is this uranium company surging all of a sudden?

Amy Legate-Wolfe ❯

@amylegatewolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest.

Published September 14, 2021 9:00 am EDT

Remember back in January, when meme stocks were the big thing? Well, guess what? They’re back. And really, they didn’t go anywhere to begin with. While the short squeeze at the beginning of 2021 was monumental, it looks like there could be more down the line. And one could be with Cameco (TSX:CCO)(NYSE:CCJ). Cameco stock, along with other uranium companies, are the latest victim of Reddit channel WallStreetBets. But is the investment completely unwarranted?

What happened?

Cameco stock has absolutely skyrocketed this year. And it’s not only because of WallStreetBets. Back in January, President Joe Biden announced there would be a significant investment into renewable energy. Part of that investment would include current renewable energy methods. That includes nuclear reactors, of which uranium is needed to power these reactors.

So, enter Cameco stock and other uranium miners. Shares climbed and climbed, currently up 70% year to date and 110% in the last year! Whereas other renewable energy companies or sources seemed to explode overnight, Cameco stock seemed stable — at least, until recently.

In the last month, shares have exploded by 45%. And that’s where WallStreetBets has come in. The channel has dubbed Cameco stock and other uranium companies the next big thing. This could lead to yet another short squeeze. But before you get excited, let’s take a look at why you may want to hold off.

So what?

There were plenty of potential Motley Fool investors who talked to me during the last short squeeze. They were upset they “missed out” on making thousands, if not more! And sure, you could have. You could also have lost everything and more from the short squeeze. Shares climbed overnight and then dropped just as fast. And this risky method of investing is simply not what the Motley Fool is about.

Now, we’re at it again. And it’s really too bad. Cameco stock is an excellent company, and it’s true that it has a solid future in the renewable energy sector. Uranium prices are climbing, and at US$60 per pound, it could reach a tipping point. In fact, there could be a shortage in uranium supply in the very near future, even with Cameco stock firing at all cylinders. That would increase the price per pound even further.

But in the meantime, this tap towards the company by WallStreetBets makes it a volatile company, to say the least. Retail traders who have a lot of money to invest and aren’t as worried about what they lose continue to feed this stock price. That leaves other investors who may not have the funds available should something go wrong stuck in the mud.

Now what?

So, where does that leave Motley Fool investors looking to invest in Cameco stock? It leaves them waiting around for the present situation to cool, and it will eventually. A stable situation is far better than the potential to make or break your portfolio. As of writing, the company is overvalued with an EV/EBITDA of 31.8. It’s also overbought with a relative strength index of 78.77. And despite doubling in the last year, over the next year, analysts believe it could fall by 13% on average.

So, I’m not saying hold off forever. In fact, I’ve been writing about the strength of this company for years! But instead, hold off for now. Wait until the dust has settled around these uranium companies and go back to Cameco stock when there is the potential to make serious cash over the long run.