There's no question about it: Uranium Energy(NYSEMKT: UEC) could have turned investors into millionaires.
In 2020, shares traded under $0.40 per share. Last month, the stock price topped $8. If you had timed things perfectly, a $46,000 investment would have turned into a $1 million fortune over just four years.
Of course, it's impossible to accurately time the market at will and we can't relive the past. And not everyone has $46,000 to throw around. So, the question today is whether Uranium Energy stock can be a millionaire-maker stock again, preferably using a smaller initial investment.
Something big is happening right now: a worldwide shift in energy production attracting trillions of dollars of capital.
According to Fatih Birol, executive director of the International Energy Agency (IEA), every $1 invested in fossil fuels today is met with around $1.7 in clean energy investments. "Five years ago," he was quoted as saying in an IEA press release, "this ratio was one-to-one."
In 2023, global investment into energy-related projects was set to total $2.8 trillion, according to the IEA, with clean energy expected to command $1.7 trillion of that sum.
Where is all of that money going? A huge percentage is dedicated to wind and solar, but the rest is spread across a variety of segments like heat pumps, electric vehicles, grid upgrades, and nuclear energy.
In the 2010s, annual global investment into nuclear technologies was around $30 billion. Over the coming years, some analysts believe annual investment will balloon to $100 billion. If that's true, the next decade will present an opportunity worth tens of billions of dollars for companies like Uranium Energy, which is focused on nuclear power.
The company owns 866,000 pounds of uranium, which it purchased for an average price of $49 per pound. It also has contracts to purchase an additional 1.3 million pounds of uranium for around $46 per pound. With uranium prices currently above $80 per pound, the company is sitting on a huge unrealized gain.
Uranium Energy doesn't just own uranium inventory. It also has interests in several uranium mines throughout North and South America. Management bills itself as the "fastest growing North American uranium company." In many ways, that's true. The company has 329 million measured and inferred pounds of uranium located on its properties -- a 200% increase versus 2021 following several acquisitions.
As with any mine operator, much of that resource base won't prove economical to extract. But the takeaway is clear: A bet on Uranium Energy stock is a direct bet on rising demand, and thus rising prices, for uranium, and that bet makes sense to me.
The global surge in clean energy investment has caused a renaissance for nuclear power. Old reactors have seen their licenses extended, early power plant retirements have been cancelled, and a slate of new reactors are expected to come online in places like India and China.
As Tim Gitzel -- CEO of Uranium Energy competitor Cameco -- said in a conference call with analyst sin October 2022, "We're seeing governments and companies return to nuclear with an appetite that I'm not sure I've ever seen in my four decades in this business."
New mining supply can take years, if not decades to bring online. The result has been a growing gap in demand versus supply, which has pushed uranium prices up considerably over the past two years, which is the huge tailwind behind Uranium Energy's stock price.
Image source: Uranium Energy's February investor presentation.
Is it time to buy Uranium Energy stock?
Investing in mining companies can be an easy way to bet on commodity prices in a leveraged way.
If uranium prices increase from $50 per pound to $100 per pound, for example, that's an increase of 100%. A mining company, meanwhile, might have been generating a $10-per-pound profit at $50 per pound prices. But at $100-per-pound prices, profits increase to $60 per pound -- a 500% increase!
Looking at Uranium Energy's stock price versus uranium commodity prices illustrates this point and investor optimism. Over the past five years, uranium prices have increased by nearly 200%, whereas Uranium Energy's stock price has zoomed by more than 450%.
How much higher could uranium prices go? In 2007, uranium prices topped out at around $140 per pound, an 80% premium to today's prices. If the global demand and supply gap widens further, it's not difficult to see prices exceeding those previous highs.
Uranium Energy stock has experienced strong tailwinds since 2020. While commodity stocks in general can be volatile, it appears as if the years ahead will be kind to the company. After all, a rising tide lifts all boats, and it looks like the clean energy tidal wave will continue to build steam.
But will Uranium Energy stock be a millionaire maker for those who buy right now?
Most of the easy profits seem to be behind us. The market has caught up to nuclear energy's newfound promise, and has priced the stock accordingly.
Minting $1 million over a handful of years with a small initial investment likely won't be in investors' future with this stock. Yet Uranium Energy shares still look like a great buy for patient investors.
Few stocks have huge, decade-long growth runways, but that's exactly what you're getting here. You won't be a millionaire overnight, but regular investments into Uranium Energy stock over the long term could help your portfolio surpass the $1 million mark.
Should you invest $1,000 in Uranium Energy right now?
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