Should You Buy Cameco Stock While It's Below $95?

Cameco (CCJ) has experienced a significant rally, driven by rising uranium demand and its stake in Westinghouse Electric, with revenue growing double-digits over the past three years and a 25% gross margin in 2024. Catalysts include a projected $170 million EBITDA boost from Westinghouse in 2025, equivalent to 11% of Cameco's 2024 adjusted EBITDA, driven by new nuclear plant constructions and increasing SMR usage. Despite trading near all-time highs, analysts project continued revenue and adjusted EBITDA growth, making Cameco a potentially attractive investment given favorable uranium market dynamics and supply constraints.

Analysis

Cameco Corporation (CCJ) has experienced a remarkable stock appreciation, surging over 580% in the past five years, driven by escalating demand for uranium in new nuclear projects and its strategic 49% acquisition of Westinghouse Electric in late 2023. This partnership is poised to significantly bolster financials, with Westinghouse projected to add approximately $170 million to Cameco's adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) in 2025, equating to 11% of Cameco's 2024 adjusted EBITDA of $1.55 billion. The company's recent financial performance underscores this positive momentum, with revenue growing 21% in 2024 and gross margins expanding to 25%. Favorable uranium market dynamics, including a spot price that more than doubled over the past five years and Bank of America's forecast for prices to potentially reach $120 by the end of 2025 from approximately $70, provide strong tailwinds. Growth catalysts include new nuclear plant constructions in the Czech Republic and the U.S., the increasing adoption of Small Modular Reactors (SMRs), and persistent geopolitical supply constraints affecting competitors in Russia, Kazakhstan, and Niger, which benefit Cameco as the world's second-largest uranium producer (17% global share in 2024). Analysts anticipate Cameco's revenue and adjusted EBITDA to grow at a Compound Annual Growth Rate (CAGR) of 7% and 15%, respectively, from 2024 to 2027. Despite trading near its record high, Cameco's current enterprise value of $37.9 billion, translating to 11 times this year's sales and 20 times adjusted EBITDA, is presented as reasonable given its growth outlook and a CIBC price target of $95, suggesting further potential upside.

Key Decisions for Investors

• Investors may find Cameco an attractive opportunity for accumulation, considering its robust growth driven by the Westinghouse acquisition and strong uranium market fundamentals, even as the stock trades near all-time highs.
• It is advisable to closely monitor the execution and financial contribution of Westinghouse projects, particularly the new plant constructions, alongside the trajectory of uranium spot prices, which are key to Cameco's profitability.
• Evaluate Cameco's valuation against its projected revenue CAGR of 7% and adjusted EBITDA CAGR of 15% through 2027, and consider analyst price targets, such as CIBC's $95, as indicators of potential future performance, while acknowledging the inherent risks in commodity markets and project execution.