In a March 16 research note, analyst Katie Lachapelle reported that Canaccord Genuity increased its target price on Uranium Energy Corp. (UEC:NYSE AMERICAN) following its release of Q2/21 results and its announced commitment to building a uranium inventory.
Canaccord Genuity's new target price on Uranium Energy is $3.50 per share, up from its previous $2.15 per share target. Currently, the stock is trading at about $2.90 per share.
Lachapelle also reported that Uranium Energy took a step forward on its new initiative by entering into an agreement to buy 400,000 pounds of uranium concentrates for $10.9 million, paying the current spot price of $27.29 per pound.
"UEC's purchase is well timed, frontrunning our forecast that uranium prices will rise over 2021 (Canaccord Genuity estimates $36 per pound by year-end)," Lachapelle noted.
She explained the benefits to the Texas-based company of developing an inventory of the metal. Along with affording Uranium Energy the opportunity to take advantage of low spot prices, it will allow for the company's balance sheet to expand as prices rise.
The initiative gives Uranium Energy an inventory with which to market to utilities, and thus, potentially speed up cash flow.
Finally, the initiative allows the company to focus on production to meet U.S.-based uranium demand, that of the U.S. Uranium Reserve in particular.
"Allocations for this reserve are expected to be announced in late 2021 or early next year and should be a significant catalyst for Uranium Energy Corp.'s shares," wrote Lachapelle.
The analyst also pointed out that the company has strengthened its balance sheet, recently raising $30 million in gross proceeds and reducing debt to $10 million from $18 million. Uranium Energy now has about $65.8 million in cash and equity holdings versus the $15 million it had at the end of Q1/21.
"The company is well funded to advance development and eventual construction in South Texas, predicated on higher uranium prices and/or an allocation of the uranium reserve," Lachapelle indicated.
She reiterated that Uranium Energy could begin production, at a low cost of $3 million, in six to nine months' time from when it decides to restart, the latter expected in early 2022.
Canaccord Genuity rates Uranium Energy Speculative Buy.
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Disclosures from Canaccord Genuity, Uranium Energy Corp., Raising Target Price, March 16, 2021
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analystís personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analystís coverage universe and (ii) no part of the authoring analystís compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research, and (iii) to the best of the authoring analyst's knowledge, she/he is not in receipt of material non-public information about the issuer.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity LLC and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication)
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Uranium Energy Corp. in the next three months.