Red-hot uranium seen cooling in the longer term, Morgan Stanley warns

Sep. 14, 2021 10:45 AM ETCameco Corporation (CCJ), URA, CCO:CAUUUU, DNN, UEC, URG, NXE, EFR:CA, DML:CA, URE:CA, NXE:CABy: Carl Surran, SA News Editor53 Comments

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  • Cameco (CCJ -2.4%) and other uranium stocks (URA -4%) pull back a bit from their recent rocket ride, and while Morgan Stanley analysts think the current rally could have further to run, they are "not yet convinced that it can be sustained into next year."
  • Also: UUUU -2%, UEC -5.3%, URG -2.9%, DNN -3.7%, NXE -4.8%, but some are volatile.
  • Uranium's spot price has surged 20% since August to $39/lb, the highest since 2015, but "uranium's underlying supply-demand fundamentals haven't meaningfully changed over the last few months to warrant this price surge," Morgan Stanley strategists Marius van Straaten and Susan Bates write.
  • Uranium buying by the Sprott Physical Uranium Trust has played a key role in the rise, but this could wind up backfiring, as "better visibility of previously hidden uranium stocks could become an overhang to the market, with outflows from physical funds also a risk."
  • The pair is medium-term bullish on uranium, forecasting prices will reach $49/lb by 2024, but "the current investor-driven rally might not seamlessly transition into a 'real' deficit-driven bull market, and we could see some price weakness in between."
  • Seeking Alpha contributor Trapping Value is staying away from Cameco, saying uranium prices need to rise another 50% "to get even the first drops of meaningful cash flow."

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