Why BofA is increasing its 2022 uranium price forecast by 41%

Uranium stocks are the latest to catch the attention of Reddit’s WallStreetBets community, and rising uranium futures prices have prompted a Wall Street analyst to raise its price targets for triuranium octoxide.

The analyst: On Tuesday, Bank of America analyst Lawson Winder reiterated a neutral rating on Cameco Corp (NYSE: CCJ) and raised its price target from $20 to $29.

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The thesis: Winder raised its price target for triuranium octoxide for 2021 by 18% to $36.30. He also increased his 2022 goal by 41% to $53.50 and his 2023 goal by 18% to $48.50.

In the past month, the price of uranium futures has risen by about 40% to about $42.40, about a seven years high.

Along that same trajectory, Cameco shares are up 47.1%, and Winder said Tuesday that rising uranium prices are already being reflected in Camecon’s stock price at this point.

He said the stock is likely to stay volatile given that in the near term it is the only large, liquid US stock with significant exposure to uranium.

“However, we believe that any short-term price increase would be temporary. We see our current outlook largely reflected in equities,” said Winder.

Winder said the Sprott Physical Uranium Trust (OTC: SRUUF) alone has increased global demand by about 3% since August 17. Winder said producers will certainly respond to the price spike by ramping up supply, but that new offering will take some time to come online. Meanwhile, Winder said the SRUUF fund is likely to continue trading higher.

In addition to Cameco, several OTC-traded uranium penny stocks have experienced extreme volatility this week. In the past five trading days, Peninsula Energy Ltd (OTC: PENMF) shares are up 40.1%, Energy Resources of Australia Limited (OTC: EGARF) is up 40.2% and Yellow Cake PLC (OTC: YLLXF) shares are up 23.2%.

Benzinga’s opinion: Uranium is the latest meme investment to take social media by storm, and the pouring of retail trading volume into relatively illiquid OTC-listed uranium stocks has certainly led to extreme short-term volatility.

Uranium prices may continue to rise in the short term until more supply comes online, but traders can expect uranium stocks to eventually follow a similar longer-term trajectory to most of the low-float meme stock short squeeze trades of 2021.

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