Uranium mining stocks rose on Wednesday, with industry bellwether cameco (NYSE: CCJ) rising 8.2% as of 2:11 pm ET, Denison Mines (NYSEMKT:DNN) doing even better with a 14.7% gain, and smaller Energy fuels (NYSEMKT: UUUU) had the best performance of all: an increase of 17%.
Investors are betting on a resurgence in demand for nuclear energy, and their optimism is not without reason, as the tech giants like microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL)and Amazon.com (NASDAQ:AMZN) They are making multi-million dollar bets in the sector.
What is happening with nuclear energy?
Last month, Microsoft sparked the rally in nuclear stocks when it signed a power purchase agreement with constellation energy (NASDAQ:CEG) under which the latter will reopen Unit 1 of its Three Mile Island nuclear power plant. Microsoft needs extra power to run the servers in its Azure business unit and believes nuclear power could be the best way to produce that power without generating carbon emissions.
Momentum in the sector accelerated this week with announcements from first Alphabet, and then Amazon, that they too are turning to nuclear energy to power their data centers.
Alphabet’s Google business is partnering with private company Kairos Power to open a series of small modular nuclear reactors (SMR). With a total of only 500 megawatts (MW) of energy production capacity, Google’s innovations are only half of Microsoft’s. (Large-scale nuclear power plants typically generate power in the gigawatt range.) But that’s not why Google news is important. It is backing an entirely new type of nuclear power plants: SMRs, which are expected to be cheaper and faster to build than traditional plants.
In theory, that could boost demand for nuclear power (and the uranium to fuel it) faster than simply building more gigawatt-scale power plants. It is this outlook that is behind the strong interest in uranium producer stocks on Wednesday.
Excitement only grew Wednesday morning when Amazon announced plans to partner with Energy Northwest. Domain Energy (NYSE: D)and privately held X-energy to build four SMRs in Washington state and at least one in Virginia. Combined, these projects promise to bring into operation at least 620 megawatts of nuclear power, and potentially more than 1 gigawatt, equivalent to a large-scale nuclear power plant.
Should you buy uranium stocks now?
But should we buy uranium stocks amid a uranium stock buying frenzy? While I am optimistic about the prospects for the nuclear power industry in general and find validation of that optimism in all this recent news, I still think the answer to this question is… maybe, but be careful and watch the valuations .
With a market cap of less than $2 billion even after this latest share price surge, Denison Mines is arguably the cheapest of these three stocks, trading at “just” 47 times trailing earnings. Denison also has no debt on its balance sheet and has $93 million in cash, which is good news because it will need it. It is currently burning cash at a rate of $28 million a year and is not expected to turn free cash flow positive until 2028, according to analysts who follow it.
Cameco is a horse of a different color. Currently valued at over $24 billion, it is easily the most valuable stock in this sector. On the other hand, it trades at a staggering 129 times trailing earnings. Cameco is profitable and has positive free cash flow, and analysts expect its earnings to roughly triple over the next five years. Still, with a valuation that’s 27.5 times its expected 2028 earnings, it’s hard to call the stock cheap.
And energy fuels? With a market capitalization of $1.3 billion, Energy Fuels is only slightly less expensive than Denison. Analysts expect Energy Fuels to be profitable next year and begin generating free cash flow in 2027. However, it is not profitable today and, in its 25-year history, has never generated positive free cash flow.
While Energy Fuels stock seems speculative to me, it does have cash reserves that should be enough to last until its free cash flow turns positive. In a momentum-driven market where none of these stocks look cheap by traditional price-to-earnings, or price-to-free cash flow, valuation metrics, little Energy Fuels could prove to be the best performer of all.
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Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Alphabet, Constellation Energy and Microsoft. The Motley Fool recommends Cameco and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
Why Cameco, Denison Mines and Energy Fuels Stock Exploded on Wednesday was originally published by The Motley Fool