Cameco Corporation

Cameco Corporation (NYSE: CCJ) is a Canada-based company engaged in providing uranium fuel to generate clean, reliable baseload electricity around the globe. The Company also offers nuclear fuel processing services, refinery services and manufactures fuel assemblies and reactor components. It operates through two segments: uranium and fuel services.

Recent Financial and Business Updates:

• Q2 Financial Performance: In the second quarter, the company reported net earnings of USD 14 million, but when adjusted for certain factors, it experienced adjusted net losses of USD 3 million. These results were impacted by lower contract deliveries as expected, especially in the uranium segment, which had higher unit costs. However, gross profit improved due to higher average realized prices in the uranium segment. Foreign exchange losses of USD 44 million, stemming from unrealized losses on US dollar cash balances, also contributed to lower net and adjusted net earnings compared to the same period in 2022.
• Positive Outlook for 2023: The company showcased strong performance in the uranium and fuel services segments, leading to an improved revenue outlook for 2023. They now anticipate consolidated revenue between USD 2.4 billion and USD 2.5 billion, up from the previous range of USD 2.2 billion to USD 2.4 billion. This improved outlook is primarily driven by higher expected average realized prices in their contract portfolio and increased deliveries in the uranium segment.
• Long-Term Contracting Success: As of June 30, 2023, the company has secured long-term contracts requiring an average annual delivery of 28 million pounds over the next five years, up from 26 million in March. These contracts include pricing mechanisms tied to market conditions. They also have contracts spanning over a decade, ensuring exposure to favorable market conditions. Additionally, a robust pipeline of business discussions is expected to further strengthen their long-term contract portfolio.
• JV Inkai Shipments: The first shipment of their share of Inkai's 2023 production, delayed due to geopolitical issues, is anticipated to commence transit in the third quarter. Transportation risks persist in the region, and the company is working with JV Inkai and Kazatomprom to secure shipments via a route not reliant on Russian infrastructure. Delays are possible, but the company has contingency plans in place, including inventory, purchase agreements, and loans.
• CRA Tax Dispute: In March, CRA issued revised reassessments for tax years 2007 through 2013, resulting in a refund of USD 297 million in cash and letters of credit held by CRA. This refund, comprising USD 86 million in cash and USD 211 million in letters of credit, was returned to the company in the second quarter.
• Strong Financial Position: As of June 30, 2023, the company maintains a robust balance sheet with USD 2.5 billion in cash and cash equivalents, short-term investments, and USD 1.0 billion in total debt. They also have an undrawn USD 1.0 billion credit facility maturing in 2026, indicating strong financial stability.

Technical Observation (on the daily chart)

The Relative Strength Index (RSI) over a 14-day period stands at 68.26, recovering from the overbought zone and again trending upward, with the expectations of further upside to the trend. The stock's current positioning is above both the 21-day Simple Moving Average (SMA) and the 50-day SMA, signifying upward trend, and also these SMAs may serve as dynamic short-term support levels.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘SPECULATIVE BUY’ rating has been given to Cameco Corporation (NYSE: CCJ) at its current price of USD40.20 as on September 25, 2023, at 8:41 am PDT.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

The reference date for all price data, currency, technical indicators, support, and resistance levels is September 25, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.