Shares in Cameco Corp. (CCO-T21.160.683.32%) and -- to a greater extent -- Uranium One Inc. (UUU-T2.940.2810.53%) are up sharply today after J.P. Morgan initiated coverage of both stocks with an “overweight” rating. The bank is bullish on the sector in general, forecasting a meaningful improvement in uranium prices through 2014, as a supply deficit arises from numerous project delays and a reduction in secondary supplies. MORE RELATED TO THIS STORY Cameco expects some nuclear reactors in Japan to restart soon China eyes Canadian uranium mines Resurgent uranium lights fire under stock prices Cameco Corp. (CCO-T) 21.13 0.65 3.17% As of Apr 17, 2012 2:47 Range:1 Day 5 Day 1 Year View Larger Chart Add to Watchlist Uranium One (UUU-T) 2.94 0.28 10.53% As of Apr 17, 2012 2:47 Range:1 Day 5 Day 1 Year View Larger Chart Add to Watchlist “UUU and CCO are low-cost producers with strong production growth profiles, and we are forecasting solid earnings growth for both companies,” J.P. Morgan analysts, led by Tyler Langton, said in a research report. It’s particularly upbeat on the prospects for First Uranium, given its greater earnings leverage to uranium prices and stronger medium-term production growth profile. Share prices are reacting accordingly: Uranium One at midday is up nearly 12 per cent, and Cameco about 3.5 per cent. J.P. Morgan expects Uranium One's production to rise from 10.7 million pounds in 2011 to 14.2 million in 2014; by comparison, Cameco’s output is forecast to rise more modestly, from 22.4 million pounds in 2011 to 24.7 million by 2014. Mark Busuttil, a J.P. Morgan analyst in Australia, is forecasting uranium prices to increase from the current $52 (U.S.) per pound to average $58 in 2012, $70 in 2013, and $85 in 2014. He sees the price retreating to an average of $75 in 2015. Uranium One and Cameco are already up more than 35 per cent and 13 per cent, respectively, since the start of the year - and that’s despite uranium prices remaining flat. But both stocks are well off their highs of late February. “We view this pullback as attractive entry points as we don't believe either stock is accurately reflecting the significant increase in uranium prices we are forecasting. Both stocks also trade at discounts to their historical averages. UUU currently trades at 4.1x our 2013E EBITDA while CCO is at 7.6x compared to respective historical averages of 11.8x and 12.8x,” the analysts said. Upside: J.P. Morgan set a $5 (Canadian) price target on Uranium One and $29 target on Cameco. ______ Citigroup Inc. (C-N35.271.273.74%) shares are spiking higher at mid-day as Meredith Whitney, the influential U.S. banking analyst, upgraded the stock to “hold” from “underperform,” according to CNBC. Citigroup reported earnings Monday that beat Street expectations. Related: Citi on the rebound, but it’s a long slog ahead Related: Citigroup buoyed by capital markets, economy ______ More analyst actions to come later today
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4/17/12 at 3:03pm
