Roth Capital Partners has boosted its target price for Energy Fuels Corp. (NYSEAMERICAN:UUUU) (TSX:EFR) to $6.50 from $2.50 and repeated a 'Buy' rating on the stock following the company's recent 2002 results, noting that its switch to a sum-of-the-parts analysis drives the higher valuation.
In a note to clients, the Roth Capital analysts said: "Given current market conditions and considering UUUU's market opportunities in uranium and rare earths, we believe a sum of the parts valuation is a
more appropriate method for valuing UUUU as compared to our prior DCF method."
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They pointed out: "A lot has changed in a short time. When we last wrote on Energy Fuels in November 2020, we were concerned that the new U.S. administration would move away from the nuclear industry and that it would not support the forming of a US uranium reserve.
"In fact, the Biden administration has been very positive for the nuclear industry and has shined a light, in our view, on the value of nuclear in an effort to become carbon neutral. Additionally, the US government approved a $75 million initial budget for forming a U.S. uranium reserve. "
"Thus," the analysts added, "we believe our initial outlook was far too pessimistic. Rare earth opportunity a demonstration of strategic value. When Energy Fuels initially embarked on a pilot for concentrating rare earths, we underestimated both the potential strategic value of this opportunity, and the value the market would assign to it. The company has moved quickly to capitalize on the potential opportunity, in our view.
"Additionally, we believe UUUU may be able to finance and construct a commercial separation facility, which would significantly increase the ultimate revenue potential of this business."
They concluded. "We believe our prior use of a DCF was a reasonable approach to valuing UUUU when the uranium industry was under pressure and investor interest in the uranium industry was lower. However, as new investors have become interested in uranium and rare earths, we believe that a sum of the parts analysis is more appropriate."