Cameco: Buy, Sell, or Hold?

Global demand for energy is set to explode. As developing nations grow, their need for more energy will grow, too. In addition, the rise of artificial intelligence is forcing data center providers to reconsider how they power their businesses.

Numerous countries have committed to reducing their carbon footprint by 2050. While renewable energy sources such as wind and solar power are gaining traction, they're not nearly enough. Recently, 14 financial institutions expressed their desire to triple nuclear capacity by 2050 to reach net-zero emissions targets.

Cameco (NYSE: CCJ), a major player in the uranium industry, stands to benefit from these changing tides. With global demand for nuclear power anticipated to soar in the long run, Cameco is an appealing stock. However, before you hit the buy button, let's dive deeper into the business and associated risks.

Nuclear energy is gaining support worldwide

There has been a renewed interest in nuclear energy. Last month, several banks, including Bank of America, Goldman Sachs, Morgan Stanley, and Citigroup, came out in support of tripling nuclear energy by 2050.

The Declaration to Triple Nuclear Energy Capacity by 2050 is supported by 25 countries, including the U.S., Canada, France, Japan, the United Arab Emirates, and the United Kingdom, and stresses nuclear energy's ability to decarbonize power grids.

In a press release, the Triple Nuclear Declaration said, "Capital markets and financing can play a critical role in developing and growing nuclear energy projects worldwide. Financial institutions can provide experience, global presence, services, and solutions to support the industry."

This renewed interest in nuclear power is a welcome sign for uranium companies like Cameco Corporation. The company has operations in Saskatchewan and the United States and a 40% interest in a joint arrangement with Kazatomprom in Kazakhstan. It also has a 49% stake in Westinghouse, one of the largest nuclear services businesses in the world.

Cameco operates two mines: Cigar Lake and McArthur River. Meanwhile, its operations in the U.S. are not currently producing due to a decision in 2016 to curtail production and defer all wellfield development.

The cyclical risks of investing in uranium

Investing in uranium comes with some added risk. These businesses are cyclical and vulnerable to boom and bust cycles based on the market conditions surrounding their product. For example, Cameco's earnings grew nicely throughout the 2000s and rewarded investors with excellent stock returns.

However, things changed in 2011 when the Fukushima Daiichi nuclear disaster occurred in Japan. That even caused a reevaluation of nuclear power worldwide, and many countries took drastic action. For example, Germany decided to phase out nuclear energy entirely. Other countries, like Switzerland and Spain, banned the construction of new reactors.

Not only that, but there was also overproduction as Kazakhstan continued to increase its output. Too much supply, plus waning demand, pushed prices down, and Cameco's margins fell throughout the 2010s decade.

CCJ Revenue (TTM) data by YCharts

Renewed interest in nuclear energy is gaining momentum

Last month, Microsoft signed a 20-year power purchase contract with Constellation Energy. The deal will launch the Crane Clean Energy Center and restart Three Mile Island Unit 1, which closed five years ago. Around the same time, Oracle announced it was designing a data center powered by three small nuclear reactors.

In July, Congress passed the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act, which will lower regulatory costs and provide financial incentives for companies developing nuclear reactor technologies.

Buy, sell, or hold Cameco?

More nuclear reactors will mean more uranium demand. With banks and governments supporting nuclear power, more capital should flow into the industry to meet this growing demand.

Nuclear plant development takes years, so investors should expect this growth story to play out over multiple years or even decades. That said, Cameco is one of the best-capitalized companies in the industry and is a solid stock for investors looking to gain exposure to uranium and its long-term growth potential.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Courtney Carlsen has positions in Cameco, Microsoft, and Morgan Stanley. The Motley Fool has positions in and recommends Bank of America, Constellation Energy, Goldman Sachs Group, Microsoft, and Oracle. The Motley Fool recommends Cameco and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.