Uranium Miners Analyst Watch: May Edition

by: Itinerant

During the past two months we have been following analysts' price targets for selected uranium mining stocks as provided by Yahoo.com. In this article we would like to report on these price targets and recent target changes.

The chart shown below illustrates the Uranium Oxide spot price over the past 6 months. The present level of just over $40 per pound represents a multi-year low, which has provided chart support on several occasions since 2008. Correspondingly, shares in uranium mining and development companies are currently for sale at severely discounted levels. For those looking for a rationalization for uranium-related investments we recommend this article, which gives some compelling reasons to consider this particular sector.

We have prepared the table shown below summarizing analyst data sourced from Yahoo.com. The first three columns of this table list the company names, ticker symbols and share prices at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the number of analysts providing data and the mean recommendation given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell).

Additionally, we added columns colored in light green containing computed data given in percentages based on the share price at the time of writing (third column). The column titled "price - median" gives the difference between the share price and the median price target indicating the potential of the stock. The column titled "high-low" gives the difference between the high and the low target measuring the divergence in analyst opinions. Columns "target change" list the changes of the low, median and high targets since the beginning of March. The right-most column titled "average" gives the average target change taking into account the three previous columns.

The bottom two companies were only added recently to our list and only have one analyst providing data. Consequently some table entries are marked n/a for these companies.

Cameco (NYSE:CCJ) is the largest company covered by this report. Price targets have been reduced slightly for Cameco during the past two months following a seemingly weak first quarterly earnings report and speculation on corporate activity. However, the share price has been holding up strongly so far this year. The median price target is given 31.2% above the current share price and analysts seem to agree on this potential since the difference between the high target and the low target is only 25.2% of the present share price. Cameco currently yields almost 2% on dividends, offering some downside protection for interested investors. At 1.7 Cameco also gets a relatively strong buy recommendation by analysts.

Fundamental data regarding the two near term producers Uranerz (NYSEMKT:URZ) and Ur-Energy (NYSEMKT:URG) have been discussed in this article recently. Analysts seem to favor Ur-Energy at the moment with price targets slightly increasing over the past two months; whereas price targets for Uranerz have been cut by 36.3% on average during the same period of time. However, when looking at the potential, Uranerz still seems to offer some significant upside with the median price target 170% above the share price compared to 56.6% for Ur-Energy. Uranerz receives the strongest buy recommendation at 1.5 within the group of companies considered for this article.

Analyst targets diverge the most for Uranium Energy (NYSEMKT:UEC) with a difference of 213.8% between high and low targets. Trading at $1.52 at present, the low target is given at $1.24, which makes UEC the only company actually trading within the given target range.

Dennison mines (NYSEMKT:DNN) and Uranium Resources (NASDAQ:URRE) are only covered by one analyst each. Dennison mines is trading very close to the price target and Uranium resources has 62.5% upside between the present share price and the given price target.

Our Picks

We are speculating on Cameco reaching the $16 handle during summer doldrums, and will be strong buyers should this eventuate. We will be buyers of Ur-Energy as soon as it breaks through the post-Fukushima down-trend line as shown in the chart below. We already own Uranerz and will be adding on dips below $0.90 should the opportunity arise.

Disclosure: I am long URZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.