Uranium One Inc. UUU-T was whacked on Wednesday after the head of Kazakhstan’s state-owned uranium mining company was reportedly arrested and accused of illegally selling uranium concessions to foreign companies – a potentially big problem, given that Uranium One operates in Kazakhstan.
But does the one-day decline – down 39.5 per cent – make the stock more attractive for investors looking for exposure to nuclear energy?
Bart Jaworski, an analyst at Raymond James, advised investors to stay cautious on the stock because of the ongoing political risks involved in doing business in Kazakhstan. However, there is an opportunity here, mostly related to his belief that Uranium One is not likely to be a target of the investigation.
“Given there does not appear to be any issues surrounding the validity of the subsoil agreements and the fact that Uranium One owns the shares of the operating joint ventures, we believe it is unlikely Uranium One will be the focus of the investigations,” Mr. Jaworski said in a note.
He maintained a price target of $2.80 on the shares, but upgraded his recommendation to “market perform” from “underperform” after the sharp dive in the share price. On Thursday in late morning trading, the shares traded at $2.42, up 43 cents.
However, Adam Schatzker, an analyst at Royal Bank of Canada, took a different approach to the stock. He downgraded his recommendation to “sector perform” from “outperform” and cut his target price to $2 from $4.50 previously. He also changed his risk rating to “speculative.”
“We believe that we are in no position to judge the outcome of these events and how it will ultimately affect Uranium One,” he said in a note. “However, we believe that the investment risks for Uranium One have increased significantly.”
