Uranium Energy Stock Has Momentum—and More Upside Ahead

Key Points

• The shift into nuclear energy is going to accelerate out of necessity in the coming years, which is where Uranium Energy stock comes into play.
• Wall Street analysts are falling behind in coverage, though institutions have begun buying into this theme.
• Enough short interest is present to create a potential short squeeze on another aggressive rally.

Today's energy sector is on the cusp of one of its most transformative shifts in history. While many investors might not see it yet, the reality is that the transition from traditional to alternative energy sources is already underway, and at an increasingly rapid pace, not just in the U.S.

However, the United States does have a peculiar situation as far as energy sources are concerned, especially now that the rollout of data centers across the nation is taking up a large share of the country’s electric grid, spiking the average electricity bill that Americans have to pay today. That being said, there are truly only two ways to go about this situation before it becomes a disaster.

One short-term option is to boost efficiency in these data centers. However, even a thousand efficient data centers still consume a significant amount of electricity. That's where a long-term solution comes in—considering nuclear energy, and why Uranium Energy Corp. NYSEAMERICAN: UEC is a company investors should keep on their radar for the next few years.

First in Line: Uranium Energy Stock

As nuclear energy emerges as a practical long-term solution to surging electricity demand—driven in part by the rapid expansion of data centers—uranium is poised to become one of the most essential resources of the next decade.

That’s why investing in uranium producers like Uranium Energy Corp. could represent a direct way to capitalize on the nuclear energy boom. While UEC isn’t the only player in the sector, it stands out as a Wall Street favorite, which can help temper some of the volatility typically associated with resource-based stocks.

Since the stock is now trading at 93% of its 52-week high, the momentum around this name is clearly bullish; however, other factors are equally important as the price action. For example, the high percentage of short positions held for this company, totaling $544.4 million or 11.7% of the entire float today.

For those in the know, a short squeeze could be easily triggered if the stock keeps delivering on such aggressive rallies in the months to come. Still, then again, there must be a reason (not priced in already) for the stock to keep rallying, and this one might be why Wall Street is so fond of Uranium Energy.

The Future Is Not Even Close

According to MarketBeat’s consensus, Uranium Energy might see its underlying earnings per share (EPS) rise from 1 cent to 14 cents in the next 12 months. This outlook not only could significantly underestimate the company's actual earnings potential, but if regulation begins to favor nuclear energy, it’s also disconnected from reality.

This disconnection comes from the price of the stock itself, valuing the company at only $5.2 billion in terms of market capitalization. With this much growth in EPS expected for the future, a forward price-to-earnings (P/E) ratio of 1,187x will seem like an insane valuation for this company, even with its small capitalization, but that’s where most go wrong.

Seasoned investors often remind retail traders that markets are frequently willing to pay a premium—sometimes a steep one—for stocks they believe can outperform both their peers and the broader market. That could be exactly what’s happening with Uranium Energy and its lofty valuation.

Some on Wall Street seem unfazed by this valuation, despite their recent investments. One of these buyers is Caxton Associates LLP, which took a new $27.8 million position, giving them nearly 1% ownership of the entire company. This shows a fresh vote of confidence in the current valuation, with the hope that its growth in EPS will give it "legs to stand on."

What’s even better for retail investors is that, being a smaller company, Uranium Energy will likely not attract active coverage from Wall Street analysts. This is an advantage since any due diligence done outside of the “sell side” recommendations will create immediate alpha before the broader market realizes what’s going on.

This is why investors can rely on the consensus price target of $10.97 per share (calling for a 7.6% downside) as a potential deterrent to new crowds jumping into this company and driving it up before it is ready to enter the market. All told, markets have picked this company as a winner for the inevitable change in the energy landscape today.