With Cameco (CCJ 3.09%) trading at roughly 26 times its estimated 2025 earnings, no investor is buying stock in this uranium, nuclear fuel services, and nuclear plant services company for what it is now. It's far more likely they are buying for what it could become in the future.
As such, the case for the stock doesn't just rest on a "connect the dots" approach to its metrics and the possibility of an expanded role for nuclear energy. There is something more going on here. Let's explore.
There's an evolution underway in the energy sector. It was supposed to be a revolution, but even the most adherent enthusiasts for a clean energy transition must concede that it's taking far longer than expected. This new reality is behind the expanding appreciation for stocks connected to natural gas and liquid natural gas (LNG) and a resurgence of interest in nuclear energy.
Simply put, reliable and relatively cheap sources of energy like gas and nuclear power are likely to act, at the very least, as transition fuels to support the shift to clean energy. Their reliability supplants the intermittency of renewable power.
This evolution is a big reason why investors in Cameco, a company that supplies uranium and fuel services to 37 nuclear utilities worldwide, believe nuclear power has a bright future.
That future is supported by investment from some very significant players. All three of the leading cloud service companies have signed deals to purchase nuclear-generated electricity (cloud computing and artificial intelligence-related computing require lots of energy). Microsoft signed a deal with Constellation Energy, and Alphabet's Google is investing in small modular reactors developed by Kairos Power. Amazon is also investing in small modular reactors and continues trying to convince regulators to let it buy energy from nuclear reactors.
These leading tech companies see nuclear power as aiding their net-zero clean-energy objectives. They have an influential reach, and their support could accelerate the trend toward nuclear energy. That would be great news for Cameco, the leading pure-play nuclear company on the market.
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