While market valuations of uranium-focused stocks have drifted lower since early February 2023, supply/demand fundamentals for uranium have never been stronger, PI Financial analysts wrote in a recent note.
That said, the analysts noted they have limited their coverage focus to companies they believe offer the best potential for realizing success either through the delivery of cash-flow and/or discovery.
The PI analysts see IsoEnergy Ltd and NexGen Energy Ltd as offering peer-leading discovery upside, while enCore Energy Corp and Ur-Energy Inc provides first mover US-domiciled near-term cash-flow growth.
Longer-term, though, they said NexGen stands out amongst peers for the development potential and cash-flow upside unlocked by the development of its flagship Arrow deposit, Canada’s largest high-grade development-stage uranium deposit.
The analysts have a ‘Buy’ rating and a target price of C$9.50 per share on NexGen Energy, stating that its Arrow deposit “easily ranks as the Athabasca Basin's most significant near-term uranium development opportunity”.
“We also believe that NXE has expertise in potentially delivering new high-grade U3O8 (uranium oxide) discoveries, specifically at their Rook I project,” they added.
The analysts see further upside in the company's 49% ownership of IsoEnergy, which owns the Hurricane uranium deposit in the eastern Athabasca Basin, calling Hurricane “the most significant high grade plus-50 million pound uranium discovery in years (one of the Athabasca’s top 10 deposits)”.
All in all, they think all four companies “screen cheap” and trade at significant discounts to net asset value, and all four also trade at two-year lows at a time when the spot price of U3O8 has found support at US$50 per pound and has gained about 65% over first-quarter 2021 levels.
Contact Sean at sean@proactiveinvestors.com