Why Cameco Corporation Stock Dropped on Tuesday
When uranium prices rise, Cameco stock rises, and vice versa.
Cameco Corporation (CCJ -5.64%) The stock slipped 4.9% as of 1:15 PM ET this afternoon, and it’s not hard to see why. Supply constraints and rising demand for uranium in late 2023 and early 2024 drove the price of the radioactive metal above $100 per pound earlier this year.
However, this rally fizzled out in March, leading to a steep sell-off. Uranium prices have bounced around the mid-$80s since then and have started to slide further recently.
Why are uranium prices falling?
Why does this happen? As NorthernMiner.com explained yesterday, “Last year’s excellent run was driven by a strong demand outlook.” In contrast, the recent decline in uranium has been driven by a combination of the effects of rising supply and high demand prices.
Northern Miner blames the full restart of production on Kazakhstan’s Kazatomprom, new mines in Namibia and Australia and more production from Cameco itself. Globally, analysts currently forecast annual supply growth of 4.1% for uranium from 2030 to 2030, breaking free from supply constraints and reducing the premium buyers are willing to pay to secure the uranium they need.
Is Cameco Stock For Sale?
This is not a new phenomenon for investors in cyclical stocks such as mining companies. Low supply causes higher prices for the available supply, allowing miners to increase production to increase production. However, this additional production increases supply and pushes prices back down.
As pointed out earlier, $60 per pound appears to be the magic number that will produce more uranium, encouraging more mining, encouraging supply, and reducing prices and profits for companies like Cameco. Still priced at $80 today, profits will come easily for Cameco until enough supplies come online to drive the price down.
With the company’s stock up 70% over the past year, investors still have a window to exit the stock at a profit. But that window is starting to close. Cameco stock’s price is still up over 130x gains, so now could be a good time to sell.
